State Regulators Study Fiduciary Rule Standard for Annuity Sales
June 14, 2017 by Greg Shulas
The National Association of Insurance Commissioners has formed a working group to examine the possibility of state regulators using key principles of the DOL fiduciary rule for annuity sales. That’s according to an article published Tuesday in InvestmentNews.
The state insurance regulators are paying particular attention to provisions in the U.S. Department of Labor rule that call on advisors to only recommend products for retirement accounts that are in their client’s best interest. This fiduciary rule standard for care is generally perceived as more rigorous than the traditional suitability standard that has been adopted by most U.S. states for annuity sales. Under the suitability approach, advisors will vet factors such as the investors’ liquidity needs, risk profile and retirement outlook before determining whether or not a product is suitable or not.
Ted Nickel, Wisconsin’s insurance commissioner, said the NAIC sees merit in exploring whether state-level suitability standards can “reflect something along the lines of a best interest” standard, InvestmentNews reports. By overhauling the suitability standards, Nickel told attendees of an Insured Retirement Institute conference this week that there could be “uniformity and consistency” throughout the states regarding annuity sale regulation.
The NAIC working group will examine the phrasing of the DOL Fiduciary Rule best-interest standard, as well as “some of the other requirements” of the labor department regulation, InvestmentNews reports. The schedule for the working group’s review, its membership and other details could not be confirmed by Life Annuity Specialist by deadline.
Commenting at the IRI conference, the institute’s general counsel, Lee Covington, said the trade group is not opposed to the best-interest standard, but the “totality” of the DOL rule, which insurers have criticizes as significantly onerous and stifling to business growth, InvestmentNews writes.
The IRI and other business groups filed legal challenges against the fiduciary rule, an approach that has been unsuccessful in stopping the regulation. Currently, the Trump administration has asked for the rule to be formally reviewed, and be under consideration for full repeal if necessary. The first deadlines for Fiduciary Rule compliance went into effect on June 9.