Fiduciary/Best Interest Development
- On November 19, 2018, the NAIC released its latest draft model regulation concerning suitability in annuity transactions.
- The purpose of this regulation is to “require insurers to establish a system to supervise recommendations and to set forth standards and procedures for recommendations to consumers that are suitable, in the consumer’s interest.”
- The regulation would require insurers to act in the consumer’s interest, without placing its financial interest ahead of the consumer’s.
- Prior to recommending the annuity, insurers would be required to disclose: (1) the scope and terms of their relationship with the consumer; (2) any limitations it has; (3) how it is being compensated; and (4) any material conflicts of interest.
- Insurers would need to establish a supervision system “reasonably designed” to achieve its compliance with the regulation.
- Should an insurer violate this regulation, it would need to take corrective action and could be subject to “appropriate penalties and sanctions”.
- This regulation would not create a private right of action.
Suitability in Annuity Transactions Model Regulation