Jim Poolman discusses the suitability of annuity sales and the National Association of Insurance Commissioners' Suitability in Annuity Transactions Model Act
Former North Dakota Insurance Commissioner Jim Poolman draws upon his experience as Chairman of the National Association of Insurance Commissioner’s Life Insurance and Annuities Committee to provide a unique perspective on the NAIC’s Suitability in Annuity Transactions Model Act. Former Commissioner Poolman discusses the difficulties regulators have experienced in reaching a consensus on issues relating to suitability, the accountability of both insurers and producers in the sales process, mitigation and enforcement by insurance regulators, and the difficult balancing act that regulators must perform in trying to avoid conflicting provisions imposed by other regulatory authorities.
In his commentary, Poolman writes: “What is the definition of suitability? There is in old saying about pornography; nobody can seem to define it, but you know it when you see it. The same seemed to apply to unsuitable annuity sales. Regulators could not agree on a definition of suitability because it would be overly broad, ambiguous, and would not live up to the consumer protection standards for which regulators were striving. Early attempts at defining “suitability” for insertion into states’ Unfair Trade Practices Acts clearly were becoming futile. Thus, regulators started to focus on the sales process being used to distribute annuity products, and put consumer protections in place regarding the sales process, rather than attempt to define suitability.”
Poolman concludes: “The National Association of Insurance Commissioners Model Act has gotten serious traction. With endorsements from the National Conference of Insurance Legislators, industry trade groups, and an annuity working group comprised of a cross section of regulators, the legislation should continue to have a successful path in state legislatures across the country. Companies should start preparing now for compliance in states that don’t have suitability requirements because they are likely to come soon. They can use the NAIC Model Act as the template for the minimum standards to create systems of gathering necessary customer information, monitoring producers, and ensuring that their products are suitable for the customer. Better to prepare now than pay later!”