Oregon Bolsters Rule on Annuity Sales
June 24, 2011 by Al Slavin
| Copyright: | (c) 2011 A.M. Best Company, Inc. |
| Source: | A.M. Best Company, Inc. |
| Wordcount: | 332 |
Oregon is imposing stronger due-diligence requirements on producers selling annuities and will make companies responsible for detecting and halting inappropriate sales.
Both companies and agents will be required to keep three years of records on the client research that was done to determine whether a sale was appropriate.
Cheryl Tomlinson, spokeswoman for the state’s Department of Consumer and Business Services, said it will give regulators the ability to analyze complaints more swiftly based on a review of maintained records.
Companies will have to establish a system for reviewing sales, and demonstrate they have provided training specific to a product.
“In the past we’ve been pretty successful in getting companies to make the consumers whole in cases where they did sell them unsuitable annuities,” Tomlinson said. “Now we have the authority to order them to make that consumer whole.”
The rules are based on standards fostered under the National Association of Insurance Commissioners Suitability in Annuity Transactions Model Regulation of 2010. The NAIC approach is designed to thwart misleading annuity sales practices by agents and brokers (BestWire, March 9, 2011).
The new rule will also require existing agents to complete a one-hour training course before Jan. 1, 2012. Agents licensed after Aug. 1 will have to undergo the training before selling annuities.
DCBS has revoked or suspended the licenses for 15 agents over annuity sales issues since 2009. Those reasons included scenarios in which a transaction consumed too much of the buyer’s income or a deal was unlikely to generate benefits until after the purchaser had died.
Annuity sales generated more than $2 billion in premium for life insurers in Oregon during 2010.
Limra announced last week that week that sales of variable annuities in the United States will grow about 13% this year (BestWire, June 17, 2011). Total first-quarter U.S. sales of these stock market-linked retirement savings and income products rose to $39.8 billion, an increase of 24% from the same period a year ago.
(By Al Slavin, senior associate editor, BestWeek)
