The National Association of Insurance Commissioners says it’s finalized a revised model regulation imposing the best interest standard on recommendations of annuities.
The revisions state that agents and insurers must make all recommendations in the best interest of the consumers, and bars agents and carriers from placing their own financial interest ahead of the consumer’s, according to a statement from NAIC.
The new rule further specifies that agents and carriers must also act with “reasonable diligence, care and skill” when making recommendations.
"These changes underscore the commitment of U.S. insurance regulators to protecting consumers purchasing annuities," Ray Farmer, NAIC president and South Carolina insurance director, says in the statement. "Nearly every state has adopted the model, which has been protecting consumers for 15 years. I encourage my colleagues to work with their state legislatures to pass these updates to provide even stronger protection."
The revisions also include certain enhancements to the supervision system for assisting in compliance, according to NAIC.
The model regulation also includes language recommended by the Insured Retirement Institute, providing “a safe harbor for all insurance producers who are subject to, and actually comply with, comparable or greater standards such as requirements for those who already comply with rigorous standards,” according to a statement from the industry group. In addition, the IRI says that the NAIC’s model regulation is “consistent” with the SEC’s Regulation Best Interest, which has a compliance deadline of June 30.
“The NAIC model regulation is a significant enhancement to the standard that applies when producers recommend annuities to their clients,” Wayne Chopus, IRI president and CEO, says in the statement. “We urge states to move quickly to adopt this new regulation.”
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