The 2017 state legislative session is in full swing: at this writing, 45 state legislatures are in active session. And of course regulatory activity by state departments of insurance goes on year ‘round. Currently NAFA is tracking approximately 50 bills and/or proposed regulations across the country. Below is a sampling of some relevant activity related to the fixed annuity industry:
Insurance Producer Continuing Education Requirements
California Assembly Bill 1373 (CA AB 1373), introduced on February 17, 2017, would amend existing law regarding the four-hour annuity training that California insurance producers are required to take as part of their biennial licensure renewal to include the model laws and regulations adopted by the National Association of Insurance Commissioners that relate to the sales of annuities.
Interstate Insurance Product Regulation Compact (Iiprc)
Legislation has been introduced again in both the District of Columbia and New York to have those jurisdictions join the Interstate Insurance Regulation Compact. DC B 112 was introduced on February 7, 2017 and NY AB 4822 was introduced on February 3rd. Both New York and D.C. introduced legislation during the 2015 – 2016 legislative session, but these measures failed upon adjournment. The remaining jurisdictions that have not yet joined the IIPRC include California, Delaware, Florida, North Dakota, and South Dakota.
Missouri Adopts Current Naic Model Laws Regarding Advertising of Life Insurance and Annuities, Annuity Disclosure, and Suitability in Annuity Transactions
The Missouri Department of Insurance has adopted the current versions of three NAIC Model Regulations pertaining to fixed annuities: Advertising of Life Insurance and Annuities (MDL #570); Annuity Disclosure (including all 3 versions of the current Annuity Buyer’s Guide) (MDL #245); and Suitability in Annuity Transactions (MDL #275). The amended regulations were adopted on February 15, 2017 and can be found in the Missouri Register (Vol. 42, No. 4), pp. 281 – 283.
NAFA submitted comment letters to the Department in support of the proposed regulations, and, in regard to the Annuity Buyer’s Guide, requested that the Department modify the proposed rule to include all three of the NAIC buyer’s guides, rather than just the “combination” guide. NAFA is pleased that the Missouri Insurance Director agreed to modify the rule to reflect NAFA’s requested change.
Annuity Surrender Requirements
California Assembly Bill 1398 (CA AB 1398), introduced on February 17th, would require insurers to return to the annuity contract owner all moneys due for annuity contracts that are surrendered by the contract owner as expeditiously as possible after the request for surrender is received, but no later than 45 days from the date of surrender. It would also authorize insurers to require that a request to surrender a contract be in writing and contain various elements, including, the contract or certificate number of the contract to be surrendered.
Montana Senate Bill 222 (MT SB 222), introduced on February 7, 2017, would prohibit the imposition on surrender penalties on annuity contracts after ten years from either (1) the date of issuance, or, (2) for contracts for which the annuitant voluntarily deposits a separate premium that was not required under the contract, the date of each separate annuity premium deposit. The bill would also require insurers to provide written notice to the annuitant of any surrender penalty imposed under the contract, including subsequent notices if the annuitant voluntarily contributes separate premium deposits. MT SB 222 has passed the Montana State Senate (by unanimous vote) and is now before the Montana House Committee on Business and Labor.
Suitability In Annuity Transactions Model Law
The state of Arizona has become the latest to propose the adoption of the current version of the NAIC Suitability in Annuity Transactions Model Law (MDL #275) with the introduction of Arizona House Bill 2160 on January 10, 2017. As proposed, the bill would only adopt the sections of the NAIC model relating to producer training. The new Arizona regulation would take effect on January 1, 2018, with producers who are licensed of that date having an additional six months to complete the annuity training course, if they have not already completed a substantially-similar course in another state.
Other states that are currently considering the adoption of the updated suitability regulation include Montana (Montana House Bill 145 (2107)), Virginia (14 VAC 5-45-10 et seq. (Proposed)), and Missouri (MO 20 CSR 400-5.900 (Proposed) ). Arkansas, Nevada, New Mexico, North Carolina, Pennsylvania, and Vermont remain the only states that have yet to consider its adoption.
Standard Valuation Act – Wyoming Adopts
Wyoming has adopted the NAIC Standard Valuation Model Law (MDL #820), enacting Wyoming House Bill 6 on March 1, 2017 (WY Laws of 2017, Chapter No. 67). Only Alaska, D.C., Massachusetts, and New York have yet to adopt the revised SVL.