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Illinois Comment Letter Requesting Civil Liability Protection for Agents

If there is doubt, the Department should incorporate the below language for consistency purposes and avoid creating unnecessary civil action exposure for agents and agencies operating in Illinois.

Norman Schroeder
Assistant General Counsel
Illinois Department of Insurance
122 S. Michigan Ave., 19th Floor
Chicago, IL 60603 

Susan Anders
Rules Coordinator
Illinois Department of Insurance
320 W. Washington St., 4th Floor
Springfield, IL 62767 

Re: Notice of Proposed Amendments – Suitability in Annuity Transactions

Dear Mr. Schroeder and Ms. Anders:

The Federation of Americans for Consumer Choice (FACC) is pleased to submit the following comments relating to the above-referenced amendments published in the Illinois State Register on September 16, 2022. We are providing our comments within 45 days of publication as required by the notice of rulemaking.

FACC is a trade organization representing independent agents and agencies selling fixed annuities, life insurance, and long-term care insurance. Our primary mission is to preserve freedom of choice for consumers to purchase guaranteed products through independent agents and we were active in development of the NAIC model regulation upon which the proposed changes are based.

Through this comment letter, we want to applaud the Illinois Department of Insurance for proceeding with adoption of and conforming to the latest changes to the NAIC Suitability in Annuity Transactions Model Regulation. In doing so, Illinois joins nationwide efforts to update industry sales conduct standards incorporating best interest obligations while maintaining regulatory flexibility that permits diverse delivery systems to continue providing a wide range of quality products for Illinois consumers.

Except as discussed below, we appreciate the proposed amendments follow the changes to the model regulation nearly verbatim. We believe this is important to ensure uniformity and consistency across many jurisdictions which makes implementation more cost effective for industry and ultimately benefits everyone including consumers. We trust the final adopted regulation will remain aligned with the revised model regulation and our support is based on that expectation.

With that said, we wish to comment on one apparent deviation in the proposed amendments from the NAIC model regulation. We note a portion of Section 1.B of the model regulation was not included in the Illinois proposal in its entirety as represented by the underlined language: 

Nothing herein shall be construed to create or imply a private cause of action for a violation of this regulation or to subject a producer to civil liability under the best interest standard of care outlined in Section 6 of this regulation or under standards governing the conduct of a fiduciary or a fiduciary relationship. 

While FACC agrees with other commenters that the above underlined language should be included in the final adopted regulation, we are cognizant that Illinois statutes may already address this matter in a  manner rendering the above underlined passage redundant or unnecessary. In particular, we observe existing Illinois law 735 ILCS 5/2-2201(b) provides that agents are held to a standard of ordinary care and no cause of action in Illinois may subject an agent or agency to civil liability based on an alleged fiduciary relationship except in very limited situations. That statute calls into question whether the above underlined language is redundant. 

It is therefore FACC’s view that to the extent the referenced statute already shields insurance agents and agencies from civil actions more generally based on standards governing the conduct of a fiduciary, we respect any decision by the Department to not incorporate the underlined language above in the proposed amendments. However, we believe if there is doubt, the Department should incorporate the above language for consistency purposes and avoid creating unnecessary civil action exposure for agents and agencies operating in Illinois. 

Again, we thank you for opportunity to comment and thank the Department for moving ahead with this important regulation. 


Kim O’Brien, CEO 

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