National Association of Insurance Commissioners (NAIC)
Department of Labor (DOL) Fiduciary Rule
We believe the new fiduciary advice requirements adopted by the Department of Labor and finalized last February should be given a chance to work and the Department should refrain from making more changes. While we respect the Department’s interest in protecting investors, continually changing the rules confuses consumers and does not allow time for the industry and marketplace to adapt to the regulations that already exist. We are specifically concerned that small and medium-sized insurance agencies are not well equipped to keep altering business practices to meet ever-changing rules and requirements. FACC does not believe that a one size fits all approach to regulation is helpful for consumers and in fact harms them by restricting choice of the type of advice they wish to receive, the various ways they may pay for that advice, and the wide-range of products and services offered through independent distribution.
FACC filed a lawsuit against the DOL on February 2, 2022. Read the lawsuit here.
Best Interest Model Adoption
FACC believes that every state should adopt the NAIC Annuity in Transactions Model #275 – without deviation from the Model. Regulators, Industry, and Consumer groups worked tirelessly to develop a best interest standard that was workable for insurance professionals, administratively feasible for insurance companies, and most importantly offered strong protections for consumers. Every state should adopt a best interest standard that incorporates all of the requirements and elements put forth in the NAIC Model without delay.
NAIC Working Group – FAQ
The NAIC A Committee (Life Insurance and Annuities) adopted a Frequently Asked Questions (FAQ) on July 19, 2021. FACC worked with fellow trades and regulators over the past year to help construct the questions and inform the answers. The FAQ provides guidance for the new best interest requirements contained in the 2020 version of the Suitability in Annuity Transactions Model Regulation. It is intended to assist in uniform implementation and enforcement of the 2020 Model Regulation across all state jurisdictions assist insurance agents and agencies in efforts to comply with the new best interest requirements.
The NAIC Model 520 regulation prohibiting agents and insurance companies from assisting customers who have larger premium deposits from understanding their state’s Guaranty Association coverage until the policy is delivered is harmful to consumers. FACC believes the restrictions of the disclosure and the required timing at policy delivery is too late for consumers to make informed decisions about their life savings and potentially harmful for Americans who choose guaranteed annuities for retirement. Consumers should be made aware of how the Guaranty Fund works as well as how insurance companies are regulated and watched to ensure solvency when considering a product from any insurance company and not until after they have already purchased an annuity. FACC has made it a top initiative to work with the NAIC and the state regulators on creating earlier and more effective disclosures for consumers before they have deposited their savings with a single insurance company or annuity contract.
DEI Considerations for Life Insurance Underwriting
Colorado recently passed SB 169. The act prohibits an insurer from:
- Unfairly discriminating based on an individual’s race, color, national or ethnic origin, religion, sex, sexual orientation, disability, gender identity, or gender expression in any insurance practice; or
- Pursuant to rules adopted by the commissioner of insurance (commissioner), using any external consumer data and information source, algorithm, or predictive model (external data source) with regard to any insurance practice that unfairly discriminates against an individual based on an individual’s race, color, national or ethnic origin, religion, sex, sexual orientation, disability, gender identity, or gender expression.
After a stakeholder process, the commissioner shall adopt rules for specific types of insurance, by insurance practice, which rules establish means by which an insurer may demonstrate that it has tested whether its use of an external data source unfairly discriminates based on an individual’s race, color, national or ethnic origin, religion, sex, sexual orientation, disability, gender identity, or gender expression.
FACC has been accepted as a stakeholder and will closely work with the Department and other stakeholders to ensure consumer access to competitive and cost-effective products, as well as independent insurance professionals with life insurance expertise.
Tax Exemption for LTC Rider Annuity and Life Owners
For decades many states and the federal government have implemented tax incentives to encourage the purchase of Long-Term Care Insurance. Twelve states are looking to follow the State of Washington’s lead in taxing consumers if they do not own a qualified Long-Term Care Insurance policy.
Effective on January 27, 2022, the Washington law delays the program’s implementation until July 1, 2023.
FACC will focus its efforts in Washington state and other states considering the tax to seek qualification of annuities or life insurance contracts with long-term care riders for exemption from the tax.