Annuities Best Interest Standards

Since 2003, state insurance regulators have overseen the sale of annuities to ensure products sold to consumers are suitable for them, based on a review of their needs. The Suitability in Annuity Transactions Model Regulation (#275) serves as a basis for this regulatory framework. Model #275 sets forth standards and procedures for recommending annuity products to consumers to ensure their insurance and financial objectives are appropriately addressed. Since the model's original adoption, the standards have been updated for consistency with those issued by the Financial Industry Regulatory Authority (FINRA). Most states have enacted the updated version of Model #275. In this course, we will examine the background and purpose of the NAIC Suitability in Annuity Transaction Model Regulations and the role of the Dodd-Frank Wall Street Reform and Consumer Protection Act, specifically Section 989J—the Harkin Amendment—that requires states to pass legislation to adopt the NAIC Model Suitability in Annuity Transaction Model Regulation, or rules similar. In addition, this course will examine in great detail the issues and standards that apply to the recommendation and sale of annuities in accordance with the NAIC’s revised Suitability in Annuity Transactions Model Regulation (#275). The cornerstone of the amended Model 275 regulation is an enhanced standard of producer and insurer conduct in order to ensure that any annuity recommendation or sale is in the consumer’s best interest.