Tennessee became the 31st state to adopt a rule requiring best interest standards for annuity sales and recommendations, according to the American Council of Life Insurers.
The rule adopted by the Tennessee Department of Commerce and Insurance is the latest state regulation or law patterned after the National Association of Insurance Commissioners’ (NAIC) model, which was finalized in 2020.
The NAIC model, “Suitability in Annuity Transactions Model Regulation,” was designed to give states a template to follow to align regulation of annuity sales and recommendations on the state level with that of securities on the federal level by the Securities and Exchange Commission’s Regulation Best Interest rule.
Like that rule, the NAIC model states that agents can’t put their own financial interests ahead of consumers and sets out a number of obligations they must meet that mirrored the SEC’s work. However, like Reg BI, the NAIC model stopped short of mandating a fiduciary standard.
Shortly after the NAIC finalized its model, Iowa became the first state to pass its own rule. In June of last year, Hawaii became the 27th state to sign its own rule or law based on the NAIC’s template, followed by Colorado, Massachusetts and Alaska later in the year.
Georgia and Wyoming are also nearing passage of best interest annuity regulation, according to the Insured Retirement Institute. Sarah Wood, the organization’s director for state policy and regulatory affairs, said more than 40 states in total might sign on by the end of the year. In addition to Georgia and Wyoming, Illinois, Nevada, Utah, West Virginia, Oregon and Washington all had active proposals to adopt the NAIC’s model rule, according to Wood.