NCOIL Holds Annual Spring Meeting
Senior Vice Presidents Bill Anderson Represents NAIFA
The National Conference of Insurance Legislators (NCOIL) held its Spring Meeting on the Isle of Palms in South Carolina and the primary issues discussed of interest to NAIFA members were – annuities, annuities and annuities. Bill Anderson represented NAIFA at the meeting.
Suitability Panel:
The first issue addressing annuities was a panel of experts discussing the NAIC’s pending Suitability In Annuity Transactions Model Regulation. Bill Anderson represented NAIFA on the panel and discussed the producers’ viewpoint on the Model. NAIFA has long been an advocate of effective suitability regulation and has supported and assisted in the enactment of the existing NAIC Model which is in place in over 40 states. The new Model adds enhancements to the existing model and NAIFA is in the process of evaluating our official position in light of the prospect of uniform enactment of the Model. The remaining members of the panel were: Eric Dupont, MetLife; Ryan Wilson, AARP; Larry Kosciulek, FINRA; and Jim Mumford, Iowa Insurance Department. The panel explained the elements of the proposed regulation to the legislators and stressed the importance of the Model being enacted uniformly in the states. The Model is expected to be finally enacted by the NAIC at its upcoming meeting in late March.
Stranger Initiated Annuity Transactions:
The Life Insurance Committee heard a report on Stranger Initiated Annuity Transactions, or STATS as they have come to be called, and saw a video and discussed the cases pending in Rhode Island where a number of life insurance companies are suing for fraudulent transactions. The cases involve an individual who recruited terminally ill people and purchased variable annuities with guaranteed death benefits which the individuals assigned to him and other investors. The investors directed the sub-accounts in the annuities to riskier investments knowing that they had no downside risk. When the individuals died, the investors collected the benefits. Click here for a detailed article on this scheme.
Members of the Life Committee were very animated in their discussion of this and very disturbed that annuities could be used in this fashion. The Committee agreed to continue to look into this issue and its next meeting in July.
The issue of STATS is garnering more interest and the NAIC has announced that it will hold a hearing on them in New York City on May 5.
Resolution Protecting Consumers’ Rights in Annuity Contracts:
Rep. Robert Damron (KY) and President of NCOIL introduced a proposed resolution at the Life Committee that focused on the Interstate Insurance Product Regulation Commission’s (IIPRC) recent adoption of Standards pertaining to Guaranteed Living Benefits (GLBs) and Guaranteed Death Benefits (GDBs) in Variable Annuity Contracts. The new standards would permit insurers to include in their annuity contracts a provision that would allow insurers to terminate GLBs and GDBs in the contract if the insured/annuitant sold the annuity contract in the secondary market.
The Industry Advisory Committee to IIPRC, the Academy of Actuaries, and independent insurance department actuaries all testified that these products were priced to the individual market and the cost of these products would increase dramatically if they went to the institutional market. The Legislative Advisory Committee and the Consumer Advisory Committee to the IIPRC objected to the Standards on the basis that a property right was being denied to the buyer in the secondary market.
After months of hearings and deliberations the IIPRC decided that companies would have the option of filing contracts with the termination provisions as long as appropriate disclosure was made to the individual purchasing the annuity.
Rep. Damron’s resolution calls for NCOIL to oppose the Standards and urges states to opt out of these standards and include in such opt-out language, a statutory provision which states that these rider benefits are assignable and shall not be terminated if the contract is sold, transferred or assigned. Click here for a copy of the resolution. Rep. Damron has introduced such a bill in Kentucky.
The resolution was discussed by the Committee but due to lack of time, it was held over to NCOIL’s next meeting in July.
Financial Services & Investment Products Committee:
The Committee heard a report and had discussion on Financial Services Overhaul developments in Congress and adopted a resolution opposing the creation of an Office of National Insurance (ONI) in the U.S. Department of Treasury. Click here for the resolution.
The Committee also adopted a resolution to exclude insurers from systemic risk regulation being considered by Congress. Click here for the resolution.
The next NCOIL meeting will be held on July 8 -11 in Boston, MA.
NAIFA Staff Contact: William Anderson, Senior Vice President – State Government Relations, at (703) 770-8193.
