Idaho became the latest state to finalize legislation governing conduct for producers selling and recommending annuities based on the National Association for Insurance Commissioners’ (NAIC) model from last year. Additionally, Virginia’s public comment period for its own rule ended last Friday.
NAIC’s model regulation was intended to "align" the standards of conduct for annuity sales and recommendations with the SEC’s Regulation Best Interest rule, which pertains to brokers and advisors recommending and selling securities. In addition to Idaho, Ohio finalized its own rule last month, while Delaware finalized its rule in January. They joined Arizona and Iowa, whose rules went into effect last year, along with Rhode Island, whose rule will take effect in April. The rules in Arkansas and Michigan go into effect in June.
Idaho’s legislation was signed into law on March 12 by Gov. Brad Little, and was lauded by advocacy organizations like the American Council of Life Insurers. ACLI President and CEO Susan Neely and National Association of Insurance and Financial Advisors (NAIFA) Idaho President Guy Stubbs said in a joint statement that the rule’s “strict requirements” would make sure financial professionals worked in their client’s best interest.
“Today’s action continues the momentum for enhanced consumer protections nationwide,” they said. “The new laws and regulations also align with the SEC’s Regulation Best Interest to bolster state and federal protections for low and moderate balance savers without limiting access to information they need for a secure retirement.”
Virginia's proposed rule broadly mirrors the NAIC’s model regulation approved in February of last year, according to Jason Berkowitz, the chief legal and regulatory affairs officer for the Insured Retirement Institute (IRI).
The Institute submitted a letter during the state's public comment period on its own proposed regulations aligning conduct standards for annuity sales and recommendations with Reg BI. Berkowitz said the issues they’ve tended to see in state-proposed regulations or legislation included determining what the effective date should be (for most states, it’s been around six months after the finalized rule) and for when requirements for training of producers should kick in.
“We want to make sure there’s certainty on the front end, because we’re finding on the back end, as states have finalized it ... and as we’re preparing and communicating with them on preparations for compliance, there seems to be different views as to what should happen when in terms of the training, Berkowitz said. “So we’re trying to get ahead of that.”
In addition to Virginia, eight other states have proposed their own rules based on NAIC’s model, including Alabama, Kentucky, Maine, Nevada, Nebraska, North Dakota, Montana and Texas, according to the IRI. Berkowitz speculated that the latter four might move toward being finalized quickly; those rules are legislative rather than regulatory, and state legislatures’ calendars will soon be coming to a close. He added the IRI was urging Alabama and Kentucky to retain the use of the term "best interest," in their final rule, which had not been included in their proposals, even though they largely mirrored the NAIC’s model rule.
“The label matters, and we’re working very hard to help those states overcome their resistance to using that terminology, so as they get to the final regulation or legislation, they are more closely aligned,” Berkowitz said.
Idaho’s new standard will go into effect on July 1.