Iowa Insurance Division adopts new ‘best interest’ rule for annuity producers
BUSINESS RECORD STAFF May 11, 2020 | 8:51 pm
2 min read time475 wordsAll Latest News, Insurance & Investments
Iowa insurance companies and sales agents will have new regulations to follow beginning on Jan. 1, 2021, that will require annuity producers to act in the best interests of customers who are purchasing annuities.
The Iowa Insurance Division announced today that it has adopted a “best interest” rule requiring annuity agents to act in the best interest of their customers. The new annuity standards follow efforts by the National Association of Insurance Commissioners to develop a model regulation that is harmonized with rule-making by the Securities and Exchange Commission. The new rule was finalized after a public comment period and virtual public hearing held on April 28.
“Iowans expect their financial professional to act in the consumer’s best interest when recommending an annuity,” Iowa Insurance Commissioner Doug Ommen said in a statement. “Iowa not only expects it, but we will require it. We are very pleased that the NAIC has approved a best interest standard. I hope to also work with other U.S. insurance regulators to require the same of any Iowa insurer writing annuity business in those states.”
As described in the rule’s purpose and summary: “This rule making will preserve consumer choice so that many more middle-class Iowans will retain access to retirement education and security that they choose. The detailed regulatory framework promotes informing consumers about risks, benefits and costs of any recommended transaction.
“This standard requires the annuity agent to only make recommendations that match the particular Iowan’s needs, objectives and situation without placing the producer’s or the insurer’s financial interest ahead of the consumer’s interest. This proposal is consistent with the efforts of the SEC and will be very beneficial to consumers.”
An annuity producer who has completed an annuity training course approved by the commissioner before Jan. 1, 2021, will have until July 21, 2021, to complete a new four-hour training course approved by the insurance commissioner or an additional one-time, one-credit training course related to the amended regulation.
The rule-making could result in the industry having to expend resources to refine or update its supervision system and training programs, the document noted. The one-time and ongoing costs of compliance are unknown.
“Overall, while the rule making may result in a fiscal impact to the industry, there is an overall benefit in that the Division rules coordinate with federal standards,” according to the rule-making document. “Purchasers of annuities should benefit from the proposed rule making due to enhanced standards of care placed on licensed industry professionals.”
Several comment letters raised a concern with proceeding with the securities portion of the rule making given the current COVID-19 health pandemic affecting business operations. In response to these comments, Ommen said the division has decided to postpone the securities portion of the rule-making and anticipates publishing a new Notice of Intended Action related to the securities portion of the rule-making this summer.