Oppose State Securities Regulation Of Variable Products, NAIC Urged

But Mirel asked, if variable products are hybrid, then why wouldnt they be subject to securities regulation? In response, he was told that sales practices allegations are unrelated to the products hybrid status.

The issue of suitability was also raised and it was noted that because suitability regulation for insurance products cannot be put in place, securities regulators are arguing that they need to regulate the product.

That argument is currently being made in efforts to enact H.B. 2347 in Kansas, a bill that would give the Kansas securities department joint jurisdiction over variable products.

In response to that issue, insurers have pointed out that the product is under the scrutiny of federal regulators, and there are suitability requirements in place at the federal level.

The starting point for the discussion should be whether a problem exists with current regulation, according to Gary Sanders, senior counsel for law and state relations with the National Association of Insurance and Financial Advisors, Falls Church, Va.

In making its case, the ACLI says the Securities and Exchange Commission, the National Association of Securities Dealers, and state insurance regulators already have oversight over variable contracts and that an additional layer would add expense in a competitive market environment.

Reproduced from National Underwriter Edition, April 7, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.