By
Lake Buena Vista, Fla.
If youre looking for ways to untangle the suitability challenge, particularly as it relates to variable annuities and life policies, one area to zero in on might be wholesaler support.
A new survey of broker-dealers shows that distributors think reps are not getting enough support to make the kinds of product decisions they are being asked to make, said Jim Doyle, vice president-professional services at Pivot/Info-One, in Easton, Conn. in a panel discussion here on the topic of suitability. The session was held during the annual Annuity Conference co-sponsored by the Life Office Management Association, Atlanta; the Society of Actuaries, Society of Actuaries, Schaumburg, Ill., and LIMRA International, Windsor, Conn.
Pivot/Info-One did the survey earlier this year, via written questionnaires sent to 20 leading broker-dealers and follow-up interviews with 10 of the 20, Doyle said. Taken together, the B-Ds represent over 85,000 registered representatives.
B-Ds have "an incredible level of dissatisfaction" with the wholesaling support they have been receiving, Doyle said. (See chart.)
And the unbundling of productssuch as the offering of various VA death benefit options and other guarantees, often for an additional costis widely viewed as increasing the complexity of the products, he said.
When asked if unbundled contracts raise suitability issues, "56% of the respondents answered yes," Doyle said.
As he put it, "new share classes, benefits, features and benefit formulas, and the increase in available investment options have made an already complex sales process worse."
This suggests that wholesalers and producers of todays complex insurance products need more education, Doyle concluded. In addition, he suggested that streamlining the product offerings and improving communication about in-force benefits to policyholders might help lessen the problems.
Suitability as an industry issue is not going away, agreed other panelists.
For instance, Al Sheridan, corporate vice president at LIMRA, reported that National Association of Insurance Commissioners much-discussed proposed model regulation on suitability is emerging. A working group of the NAIC in Kansas City, Mo., has been looking at it for the past four years, and the discussions have been politicized and complicated by ongoing debates over having state or federal regulation, he allowed.
But now, certain state insurance regulators have strong interest in having something done on the model by June, with a focus on monitoring suitability of fixed life and annuity products.
Companies with agents who sell both fixed and variable products will probably have to come up with a common set of suitability questions, for both classes of products, predicted Judith Hasenauer, a partner in the Blazzard, Grodd & Hasenauer, PC., law firm, Ft. Lauderdale, Fla.
Suitability is on the front burner for regulators this year, she noted in her talk.
Currently, she pointed out, NAIC has no model regulators for VAs, and most states defer to the Securities and Exchange Commission and the National Association of Securities Dealers, both in Washington, on variable life suitability matters.
But common law has already raised a number of suitability considerations, she noted, citing some key trends in this area. For instance:
–"A person who hangs out a shingle as a professional implies a representation that he is a professional with a duty to deal fairly with customers.
