Big Changes Ahead
The passage of the 2010 NAIC Suitability in Annuity Transactions Model Regulation that occured on March 28, 2010, and is destined to be in effect by year end, will forever change the way annuities are sold. Here’s why:
- Insurance companies are now responsible for unsuitable annuity sales which means they will have more exposure to litigation and disciplinary action
- Every annuity transaction must be reviewed for suitability prior to policy issue
- Prior to making annuity recommendation producers must gather information about the consumer in 12 areas of suitability information
- Companies must train and monitor the sales activity of their annuity producers
In short, insurance companies will turn down every annuity application unless they can document that every step in the sales process follows suitability laws. Last year’s blog post, Please Don’t Feed the Lawyers, is more relevant now than ever before.
These regulations will be a nightmare unless there is a standardized system for agents to enter and calculate the required suitability data, demonstrate a need for annuity products, provide product disclosures, submit all the required forms, and have the insurance carrier be able to prove that the annuity producer followed the letter of the law.
See Related Articles:
Wisconsin Regulators Eye Annuity Suitability
Insurers to be responsible for fixed-annuity suitability
NAIC Acts On Annuity Suitability - Contract Resales
Suitability 101