Recent revisions to the Suitability In Annuity Transactions Model Regulation, approved in late March 2010 by the National Association of Insurance Commissioners, will ring in changes for agents and brokers who sell fixed annuities (in states that adopt the model regulation) and for the insurers who offer fixed annuities.
The new rule:
- Mandates completion, within six months of its effective date, of a four-hour training course on annuities.
- Insurers must verify agents’ completion of this course before permitting them to sell any annuity, except contracts used to fund individual retirement accounts, qualified plans, deferred compensation arrangements, or structured settlements.
In other words, it applies to nearly all “non-qualified” annuities. It requires that insurers review all annuity transactions, and it makes them responsible for compliance with the regulation, even if they hire a third party firm to monitor compliance.
The NAIC guidelines for factors to consider
- Annual Income
- Financial Situation and needs: including the financial resources used for the funding of the annuity
- Financial Experience
- Financial Objectives
- Intended Use of Annuity
- Financial Time Horizon
- Existing Assets, including investment and insurance holdings
- Liquid Net Worth
- Risk Tolerance
- Tax Status
I personally would not mind being required to take a 4 hour training course if it meant that the requirement helped "raise the bar" for the entire industry. And while we are at it, how about licensing requirements and similar standards for those that operate in the structured settlement secondary market?
Read John L. Olsen's article on the Annuity Suitability Model Regs from the April 29, 2010 edition of National Underwriter