NAIC Fills in the Annuity Suitability Passage Map

The U.S. Labor Department has revived efforts to set a fiduciary standard of care, which would require annuity sellers helping clients roll assets over from 401(k) plans or individual retirement accounts to put the clients’ interests first.

The standard might block uses of commission-based compensation and might expose annuity sellers to risk of lawsuits, even if the annuities performed as promised, if the annuities’ performance turned out to be worse than the performance of some competing products.

The NAIC packaged its own annuity sales standards measure as an update to an older set of annuity sales standards, the NAIC’s annuity suitability model.

The update is designed to complement the U.S. Securities and Exchange Commission’s Regulation Best Interest.

Reg BI requires annuity sellers to act in the best interest of the consumer. It requires the sellers to disclosure conflicts of interest but does not prohibit use of commissions.

Regulators believe that a provision in the Dodd-Frank Act may keep the SEC from seeking to regulate non-variable indexed annuities or other annuities as securities if states adopt strong, uniform annuity sales standards.

Credit: CIA