The Direction of Annuity Suitability Regulation
Noreen J. Parrett, Esq. wrote an excellent article in the Fall 2008 Federation of Regulatory Counsel Journal that uses facts from the settlement on June 16, 2008 between the Wisconsin Office of the Commissioner of insurance and Pennsylvania Life Insurance Company. I highly recommend that you read her entire article, but here is a brief outline:
a) Penn Life was fined $925,000 for not properly supervising its agents
b) The article cites many examples of obviously unsuitable sales made by Penn Life’s agents
c) Penn Life was ordered to provide its agents with written standards, processes, and procedures as to what constitutes a suitable sale
d) Agents are required to provide a written a disclosure to clients to assist in the consumer’s understanding of the product
e) Agents are required to perform a client liquidity analysis
f) Penn Life must hire a compliance department to review most annuity sales, and to call all applicants over the age of 70
g) Penn Life must approve all lead cards, marketing material, and sales scripts / presentations
h) Penn Life must provide uniform mandatory annuity product training, including a written test
Her main point: Even though most annuity carriers have implemented much of the above, regulations will continue to get more stringent until abuses stop completely.
For more information see an earlier article by Connie O’Connell and Noreen Parrett.