Many states rushed to adopt an annuity sales rule revision, but big update gaps remain.
As many as 14 states and the District of Columbia are still using the National Association of Insurance Commissioners' old sales rules, without strong indications that they will move to the new version soon, according to an NAIC implementation map.
What It Means
Traditionally, states have regulated sales of fixed annuities, or annuities that protect holders against investment-market-related loss of principal.
The U.S. Securities and Exchange Commission has regulated variable annuities.
Some state officials have suggested that the SEC could have the legal authority to begin regulating fixed annuity sales if states fail to move quickly to make the NAIC's updated sales rules a national standard.
The History
The NAIC adopted the model that now shapes regulation of fixed annuity sales — the Suitability in Annuity Transactions Model Regulation — in 2010. The suitability model requires annuity sellers to verify that the annuities sold to consumers suit those consumers' needs.
In 2019, the SEC adopted Regulation Best Interest. Reg BI requires annuity sellers to document that they have acted in the best interests of annuity shoppers, rather than putting their own revenue first.
The NAIC adopted suitability model changes based on the SEC's Reg BI standard in 2020.
Reg BI supporters say that it will let insurers keep traditional, commission-based agent compensation arrangements in place, and that alternative rules, based on a fiduciary standard, would eliminate commission-based annuity sales compensation.
