NAIC's summer meeting in Philadelphia washed out by Hurricane Irene; decision on disclosure model to come later this month
It appears that nasty weather has pushed back a key vote by regulators on an annuity disclosure model rule.
The National Association of Insurance Commissioners originally had slated its summer meeting in Philadelphia for Aug. 28 through Sept. 1. But the association called off the event due to expected bad weather from Hurricane Irene. As a result, a handful of regulatory discussions will now take place by phone.
Regulators in the NAIC's joint executive committee and plenary bodies had planned to consider the annuity disclosure today.
Jim Mumford, Iowa's first deputy commissioner of insurance, said he expects the NAIC's executive plenary group would vote on adopting the annuity disclosure model rule on a conference call some time this month.
Separate from the NAIC's annuity suitability rule, the annuity disclosure model rule would require that clients receive a buyer's guide when purchasing an annuity.
Carriers also would have to include a disclosure form that describes the contract, its benefits and how it works. In the case of fixed indexed annuities, the document must indicate the basis for caps, spread and participation rates. Customers also would get a break down of the impact of any riders, along with an explanation of the contract's federal tax status and the penalties that apply to withdrawals.
The proposed rule also would standards for annuity illustrations, which are provided to the customer to show how the product has performed. For fixed indexed annuities, carriers would have to show how a given index has performed over the last 10 years, as well as the index's best and worst historical performance over a decade.
The regulations are a relief for independent marketing organizations and broker-dealers that sell fixed indexed annuities. Historically, carriers haven't had a standardized way to illustrate their policies, particularly with living benefits, some distributors said.
For instance, some presentations show the account value and how the income benefit base grows, but don't show how the income payments are extracted from the account value.
In other situations, third-party firms have created illustrations that might be too optimistic, said Andrew Unkefer, president and chief executive of Unkefer & Associates Inc.
“Most of our sales aren't illustration driven,” he said. “For an honest agent who's giving accurate advice, I doubt the regulation is going to be a barrier.”
