The annuity business in Massachusetts will stop using sex-distinct rates, as of January 1, 2009.
That's when a new law–S.B. No. 2729–goes into effect requiring gender neutrality in individual and group annuities sold to Massachusetts residents. This neutrality applies to all annuity terms and conditions, including premiums and benefits.
The law stipulates that Massachusetts residents are covered by this law whether their contracts are "issued or delivered within or without the commonwealth on or after January 1, 2009." (See sidebar.)
"The Act's rapid effective date and scope has surprised both insurers and Massachusetts state insurance regulators," says Tim Pfeifer, an actuary and president of Pfeifer Advisory, LLC, Libertyville, Ill.
It also has also raised a number of key unanswered questions that need regulatory clarification, he says.
Darrell Lamar, a spokesperson for the Executive Office of the Department of Housing and Economic Development, Boston, says state officials are working on developing regulations to implement the Act now. Several meetings with key policy stakeholders, such as legislators and department staffers, have already been held, he says, and "we are confident we'll be able to meet the January 1st effective date."
The Executive Office includes the Massachusetts Division of Insurance.
Cailie Currin, an attorney specializing in compliance work for insurance companies, hopes the regulations will clarify some "puzzling" aspects of the law.
It is a very broad statute, explains the president of Currin Compliance Services, LLC, Greenwich, N.Y. "We're hoping the regulations will rein it in."
As it stands now, insurers are not sure how to comply, she says. Currin cites the law's "extra-territorial" focus as an example. This appears in the law's prohibition of sex-based distinctions for an annuity "covering residents of the commonwealth which is issued or delivered within or without the commonwealth…"
It is clear that the law applies to Massachusetts residents wherever they buy their annuities, she says. But the phrase "issued or delivered" is not clear, she continues. "Most insurance law uses the phrase 'issued for delivery,' not 'issued or delivered.' Perhaps 'issued for delivery' is what the legislators meant, but it's unclear what they were looking to address."
Interpretation becomes murkier when considering annuities issued to Massachusetts residents who, say, winter in and buy annuities in Florida, she says. "What if those snowbirds buy annuities in Florida from insurers that do not do business in Massachusetts?" Currin asks. "Right now, it appears such insurers would need to offer those residents a Massachusetts-compliant policy, even if the policy is issued and delivered in Florida."
Pfeifer raises another question. It is not clear "whether the rule applies to settlement options on post-January 1, 2009 life insurance contracts, supplementary contracts associated with contracts issued before 2009, or to any gender-distinct charges and benefits (other than annuitization rates) on annuities, which are relatively rare today."
Pfeifer also sees the Act's specific application to Massachusetts residents wherever they buy annuities as a complicating factor.
"Massachusetts carriers will need to be able to issue gender-neutral annuities in all states they sell in by January 1, 2009," he explains. And "since most carriers would be expected to respond to the Act with gender-blended payout rates, it less likely that a male annuitant who is a Massachusetts resident would cross state lines to buy a more competitive payout annuity."
