Annuity Issuers Should Improve Their Best-Interest Reviews: Regulator

State insurance regulators want some fixed annuity issuers to work harder at monitoring their sales and distribution networks.

The regulators have offered the issuers an alternative to U.S. Labor Department oversight, by creating an annuity suitability regulation update based on the U.S. Securities and Exchange Commission’s Regulation Best Interest rather than the Labor Department’s fiduciary rule requirements.

Insurer and agent groups have assumed that complying with the states’ best-interest standard will be easier than meeting the Labor Department’s fiduciary standard.

But some issuers have failed to determine whether their annuity distributors can help oversee fixed annuity sales, some are auditing their annuity sales only every few years, and some are auditing just a small fraction of 1% of their annuity sales, according to Doug Ommen, Iowa’s insurance commissioner, who serves as chair of the National Association of Insurance Commissioners’ Annuity Suitability Working Group.

Ommen gave that assessment at an NAIC meeting in March, based on the results of suitability update compliance reviews conducted by regulators in Iowa and other states, according to draft meeting minutes.

What it means: Even as insurers are fighting in court to keep the Labor Department from imposing a federal fiduciary standard on life insurers and agents involved with rollovers of retirement account assets into life and annuity products, state regulators are questioning how insurers are complying with the state standards.