On the heels of the National Association of Insurance Commissioners adopting a model best interest regulation regarding the sale of annuities, Iowa has rolled out one of its own.
The move makes the Hawkeye State, home to several large annuity providers, the first to unveil such a rule.
Earlier this month, the NAIC finalized a revised model regulation that requires agents and insurers to ensure all recommendations they make put clients’ interests first.
States must work with their legislatures to adopt the new regulation.
Iowa’s rule would apply to any sale or recommendation of an annuity made on or after January 1, 2021, according to the proposal.
In addition to putting customers' interests first, the Iowa Insurance Division’s proposed rule would require insurers to set up and maintain a supervisory system for brokers’ recommendations “so that the insurance needs and financial objectives of consumers at the times of the transactions are effectively addressed,” the division says.
The rule would not apply to certain transactions, however, such as contracts to fund employee pension or welfare benefit plans covered by the Employee Retirement and Income Security Act (Erisa) or government or church plans. Direct-response solicitations, in which there’s no recommendation based on information collected from the consumer, would also be exempt, the regulator says.
The Insured Retirement Institute, whose members account for 90% of annuity assets, lauded NAIC’s revised model regulation as “a significant enhancement” to current standards.
When the NAIC rolled out the regulation, it included language recommended by the IRI that provides a safe harbor for insurance producers subject to, and in compliance with, comparable or greater standards.
Iowa’s proposed rule provides a safe harbor for recommendations made in compliance with Finra regulations, according to the regulator.
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