NAIC Discusses Health Care, Annuity Suitability, Other Key Issues at Spring Meeting

NAIFA Staff Attends to Represent Members’ Interests

The National Association of Insurance Commissioners held its 2010 Spring Meeting in Denver on March 25-28.  The primary issue discussed was, of course, the new federal health care bill recently enacted and its effect on state insurance laws and regulations.  The NAIC Health Committee held a public hearing where testimony revealed that over 35 NAIC Model Laws or Regulations will need to be amended in order to comply with various provisions of the new law.  The NAIC announced that it would work through its current committee structure to make the necessary changes and a special industry advisory committee has been formed to assist with this process.  NAIFA Vice President Diane Boyle will represent NAIFA on this committee.

Other significant issues of interest to NAIFA members were discussed at the meeting which was attended by Bill Anderson and Ron Panneton.

NAIC Suitability in Annuity Sales Rule:
The Executive/Plenary adopted revisions to the Suitability in Annuity Transactions Model Regulation with the purpose of enhancing protections for consumers purchasing annuities from inappropriate and unsuitable marketing practices.

NAIFA and other interested parties worked with the NAIC for the past year and a half with the goal of developing a revised Model which achieves the proper balance between consumer protection and more rigorous regulatory demands.

The key changes to the Model place responsibility for compliance with the Model’s requirements with the insurer even if the insurer contracts with a third party to handle compliance for the insurer. Insurers will also be required to review all annuity transactions. Producers will also need to meet both general and specific annuity product training requirements.

NAIFA’s Government Relations Committee will be given the first opportunity to consider and then recommend to the NAIFA Board what NAIFA’s official position should be on this critical new Regulation.

Annuity Disclosure:
The Annuity Disclosure Working Group continued its work revising the NAIC’s Annuity Disclosure Model Regulation. The working group received comments from the American Academy of Actuaries (AAA) regarding the latest draft revisions of annuity illustration guidelines and discussed an AAA proposed illustration template. The AAA presentation was in large part in response to the comments previously offered by the American Council of Life Insurers (ACLI) and specifically addressed the question of illustration requirements for annuities with market value adjustment provisions.

The Working Group indicated that it will focus on the following remaining issues below and anticipates concluding its work on revisions to the Model by the NAIC August meeting:

1. Whether the use of illustrations should be optional, mandatory or prohibited?
2. What annuitization rate should be used—current, end of year, other?
3. When should an illustration be delivered?
4. Should a particular format be required?
5. How should the illustration guidelines be incorporated into the Model Regulation?
6. Consider additional changes to the annuity buyer’s guides after the working group consulted with representatives from the U.S. Securities and Exchange Commission (SEC).

NAIFA’s Government Relations Committee will weigh in on items 1-5 above so NAIFA can provide feedback to the working group by an April 21 comment deadline.

Stranger-Originated Annuity Transactions (STATS):
The Life Committee received a new charge: explore the issue of stranger originated/owned annuities, how these transactions may interact with insurable interest laws and the impact of this activity on consumers with respect to any appropriate regulatory action in the form of revisions to the Viatical Settlements Model Act, a new model or other appropriate regulatory response.

The Committee has scheduled a public hearing on this issue on May 20 in Washington, DC and NAIFA is planning to testify.

Producer Licensing:
Highlighting the significant achievements made toward a one-stop solution for producer licensing, the National Insurance Producer Registry (NIPR) released its 2009 Annual Report at the meeting. The year's successes include: completion of ninety-six significant state project implementations; release of a reengineered reports function; expansion of the Attachments Warehouse with a Reporting of Actions (ROA) function; and newly focused Vision and Mission Statement.

The NIPR Board also met at the meeting and reviewed and discussed the many positive achieveents that NIPR has experienced over the last year including the landmark issuance of its 100 millionth licensing transaction.

Bill Anderson is Vice President of NIPR and represents NAIFA’s interest on the Board.  NAIFA’s website contains a link to NIPR’s website allowing NAIFA members a direct link to electronic processing of licensure throughout the 51 jurisdictions.

The Producer Licensing Working Group met in Denver and addressed the following issues:

1. Discussed the status of the 2009 State Licensing Handbook and agreed to update the material to reflect action taken since its publication
2. Discussed the limited lines charge and agreed to analyze each limited line currently defined in the Producer Licensing Model Act and consider the possibility of adding an ancillary line
3. Discussed Producer Testing and Examinations and agreed to  study testing requirements and work toward uniformity among the states with regard to content and pass rates

The NAIC/Industry Producer Licensing Coalition met and continued to identify issues that are hindering uniformity in producer licensing and work toward solving these problems.  Bill Anderson represents NAIFA on the Coalition which received a progress report on recent assessments of state compliance with NAIC reciprocity and uniform licensing standards indicating an 86% compliance rate representing an increase from 80% compliance last year.

The next meeting of the NAIC will be held in Seattle, WA on August 14 – 17, 2010.  However, since the NAIC reduced its annual meetings to 3 per year rather than 4, much work will be done at interim meetings of its committees and working groups and myriad conference calls.  NAIFA will be represented on all issues of importance to its members.

NAIFA Staff Contact: William Anderson, Senior Vice President – State Government Relations, at (703) 770-8193; or Ron Panneton, Senior Counsel – State Government Relations, at (703) 770-8187.