Illinois and Georgia grew to become the thirty second and thirty third states to undertake guidelines requiring a finest curiosity commonplace for annuity gross sales and suggestions primarily based on a mannequin designed by the Nationwide Affiliation of Insurance coverage Commissioners (NAIC).
Illinois’ Division of Insurance coverage and Director Dana Severinghaus adopted the rule Feb. 14, in response to the American Council of Life Insurers, with President and CEO Susan Neely urging extra states to observe swimsuit.
“The brand new rule in Illinois provides momentum to the nationwide push for protections that safeguard shoppers whereas additionally making certain that middle- and working-class households retain entry to annuities,” she stated.
The NAIC mannequin rule, referred to as “Suitability in Annuity Transactions Mannequin Regulation,” was initially finalized in 2020 and provided states a template to craft their very own annuity regulation or laws. The rule presupposed to align state-level oversight of annuity gross sales and advice with the regulation of securities on the federal stage by way of the Regulation Finest Curiosity rule from the Securities and Trade Fee (SEC).
Whereas the NAIC mannequin mandated that brokers couldn’t put their very own monetary pursuits forward of shoppers, it additionally mirrored Reg BI in not setting a fiduciary commonplace for brokers recommending or promoting annuities.
The mannequin rule had its critics, together with Birny Birnbaum, the manager director for the buyer advocacy group Heart for Financial Justice, who referred to as the rule “one of the vital anti-consumer actions” taken by the fee, arguing its finest curiosity commonplace was woefully inadequate.
“Mainly, it takes the suitability commonplace of care, and calls it one of the best curiosity commonplace of care, with one substantive change,” he stated on the time.
On the mannequin being finalized, Iowa grew to become the primary state to move its personal rule primarily based on it in Feb. 2020. Most lately, Tennessee adopted its personal rule primarily based on the mannequin, finalizing it in January.
In keeping with Sarah Wooden, the director for state coverage and regulatory affairs on the Insured Retirement Institute (IRI), as many as 40 states could signal on by the 12 months’s finish. Wyoming is near passing its personal regulation, and Nevada, Utah, West Virginia, Oregon and Washington all have lively proposals to undertake guidelines primarily based on the NAIC mannequin.