Suitability Working Group - NAIC

  • 4. Report of Suitability Working Group
  • Mr. DeAngelo said the Suitability Working Group had two charges in 1999:
    1. to amend the Advertisements of Life Insurance and Annuities Model Regulation
    2. and to develop a white paper on Suitability of Sales of Life Insurance and Annuities.
  • At the 1999 Winter National Meeting, the working group thought it had completed work on the advertising regulation but an issue was brought to the A Committee and the working group was asked to consider this issue.

2000-1, NAIC Proceedings

  • 2001-1, NAIC Proceedings
    • Michael Lovendusky (American Council of Life Insurers -- ACLI) urged the working group to consider not including the authority in the Unfair Trade Practices Act.
      • He said he has a fundamental question as to whether the regulation is needed at all; but if it is needed, it is important enough for a separate authorizing statute that is not part of the Unfair Trade Practices Act.
      • He offered to provide a draft to the regulators of a stand-alone model prepared by the ACLI.
      • He again urged the regulators not to draft a model at all.
      • He said he understood this was a charge to the working group but suggested talking to the parent committee to convince them a model is not needed.
      • He said the Unfair Trade Practices Act is the bedrock of market practices.
      • Suitability is not as much about practices as about insurer liability.
      • He asked the regulators not to encumber the Unfair Trade Practices Act with this "sea change."
      • He said some unfair trade practices acts in the states include a private cause of action and he would not want to see suitability standards included there.
    • Ron Panneton (National Association of Insurance and Financial Advisors -- NAIFA) said most of the comments from his association focused on whether the regulation should apply to recommendations and sales or just to recommendations that result in sales.
      • He said the company has an obligation to draft guidelines for producers and to make sure they are used. The company should have the ultimate responsibility for unsuitable sales because it should look at the applications that come in.
      • He urged the working group to consider both sales and recommendations.

    • Gary Sanders (NAIFA) said he would like to see the regulation cover sales and recommendations that result in sales.

      • If an inappropriate product has been sold, both the insurer and the producer should have liability.

      • He opined that the draft in its current form does not accomplish that objective.