Menu

Expect Focus Life Insurance, September 2018

As Students Return to School, Regulators Continue Their Study of the NAIC’s Suitability in Annuity Transaction Model Regulation

Financial Services Regulatory   |   Insurance   |   Life Insurance & Financial Lines   |   Securities & Investment Companies   |   Securities Transactions and Compliance   |   October 1, 2018
Download   
Share Page

At the 2018 NAIC Summer National Meeting, regulators continued their efforts to define the standard of care that applies to recommendations. This subject was discussed at both the Annuity Suitability (A) Working Group (Suitability WG) and Life Insurance and Annuities (A) Committee (A Committee) meetings.

The first lesson covered whether life insurance should be included in the proposed revisions to the Suitability in Annuity Transactions Model Regulation (Suitability Model). New York raised its hand with an answer, arguing at the A Committee meeting that a best interest standard should apply to life insurance. New York recognized this might exceed the Suitability WG’s current lesson plan, but suggested, with California and Washington D.C.’s support, that the A Committee revisit the subject in the future.

Another lesson concerned whether the Suitability Model should apply to in-force transactions. At the Suitability WG meeting, Director Cameron lectured that, anytime a producer is in front of a consumer, she has the responsibility to review existing contracts. Unsurprisingly, New York raised its hand again to concur. The ACLI and IRI warned that this change would greatly expand an insurer’s homework under the Suitability Model and impact the servicing of annuity policies. The IRI noted that extending the Suitability Model to in-force transactions would be significant because annuity holders may exercise several contractual rights over the life of the contract.

The final lesson addressed “material conflict of interest.” At the Suitability WG meeting, California suggested that regulators sharpen their pencils and expand on the current definition to clarify that the consumer’s interest must be placed before those of the producer and insurer. On the other side of the playground, the IRI and NAFA argued for the use of the well-established definition of “material conflict of interest” from Basic v. Levinson.

As the school bell rang, Director Cameron called for recess and said the Suitability WG would finish the course another day. On September 7, the Suitability WG called an end to the recess and scheduled a two-day interim meeting in Chicago on October 22-23.

We will continue to monitor the activities of the Suitability WG and the A Committee during the new semester.

 

©2018 Carlton Fields Jorden Burt, P.A. Carlton Fields practices law in California through Carlton Fields Jorden Burt, LLP. Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form via the link below. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.

Subscribe to Publications

Disclaimer

The information on this website is presented as a service for our clients and Internet users and is not intended to be legal advice, nor should you consider it as such. Although we welcome your inquiries, please keep in mind that merely contacting us will not establish an attorney-client relationship between us. Consequently, you should not convey any confidential information to us until a formal attorney-client relationship has been established. Please remember that electronic correspondence on the internet is not secure and that you should not include sensitive or confidential information in messages. With that in mind, we look forward to hearing from you.