A group of independent marketing organizations are dissatisfied with how industry trade groups are representing them in best-interest regulatory discussions.
A letter signed by 14 IMO executives was sent last month to the leading trade associations that represent annuity sellers. They say trade groups are too accepting of best-interest ideas put forth by the National Association of Insurance Commissioners.
The NAIC is accepting comments on a tentative annuity sales model law until Feb. 15.
“We have been reading about and watching developments at the NAIC concerning ‘best interest’ and scratching our heads why our trade associations seem to be going along with the NAIC proposal and not fighting against warrantless regulations,” the letter reads. “This has made us worry about the direction of our industry, the future of our businesses, and the protection of our clients.”
The letter goes on to note that the industry successfully lobbied and killed the Department of Labor fiduciary rule put forth by the Obama administration. A federal appeals court in New Orleans overturned the DOL rule last summer.
“We are perplexed why the life insurance industry fails to oppose best-interest proposals which ultimately appear to do the same thing,” the letter reads.
Whole New Ballgame
The answer to that is simple — the playing field has quickly changed, explained Gary Sanders, vice president of government relations for the National Association of Insurance and Financial Advisors.
When the DOL rule was being debated in 2016, it was the only rule in town. Today, the Securities and Exchange Commission and several states are all working independently on best-interest or fiduciary rules, in addition to the NAIC effort.
Taking a hard-line opposition to those rules is not a “real viable approach to what is happening right now,” Sanders said. “Itâs important as a general rule not to be saying ‘No’ to everything that comes down the pike. We think itâs important to be favor of something.”
NAIFA supports a “reasonable best-interest standard,” Sanders added, and remains opposed to extending fiduciary duty status to annuity sales. The NAIC effort could be better, he conceded.
“We think it needs some work and we think it needs some tinkering but we donât oppose it wholesale like this IMO group apparently does,” Sanders said.
Representatives from both the Insured Retirement Institute and the American Council of Life Insurers both pledged to work for all of their members. Both groups received the IMO letter, as did NAIFA.
“Weâre still working with our members on comments on the NAIC proposal but they will reflect our commitment to a uniform, harmonized best interest standard of care for annuities and securities transactions across all state and federal regulatory platforms for financial services firms and financial professionals,” said Whit Cornman, director of media relations for ACLI.
An NAIC working group debated its annuity sales model throughout 2018Â — mostly without success due to a few thorny issues. Finally, they put out aÂ draft rule that takes a pass on many controversial topics that arose during working group meetings in Kansas City (May 31-June 1), Boston (August) and Chicago (October).
In fact, a drafting note explains that the rule will avoid even the term “best interest” until it is further defined by the SEC and FINRA.
In another section, a paragraph on extending the rules to supporting personnel who deal with consumers is tacked on for future discussion. A New York representative suggested this language at the Chicago meeting.
Meanwhile, several states are moving ahead with their own best-interest rules that will change how annuities are sold.
New York is most advanced in this regard, with a rule that will take effect in August for annuity sales, and six months later for life insurance sales. It requires producers to undergo training and is expected to add plenty of documentation paperwork to their sales processes. The New York rule requires producers to place the consumers best interest above their own.
The IMO execs are also unhappy with the trade group response to the New York rule.
“These concerns are exacerbated by seeing New York so easily twist best interest into a fiduciary duty with no challenge whatsoever by the life insurance industry,” the letter reads.
The NAIC annuity sales model draft canÂ be found here.Â Comments may be made by email only toÂ Jolie Matthews atÂ [emailÂ protected].
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached atÂ [emailÂ protected].Â Follow him on Twitter @INNJohnH.
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