Annuities, Life Insurance and Regulations
A new regulation and a push to change another rule could impact both what annuities are offered to you and who can sell you life insurance.
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First, InvestmentNews reports that nine states have adopted the National Association of Insurance Commissioners’ annuity suitability model. (All states are anticipated to eventually adopt it.) This regulation calls for more stringent state-required annuity exams and courses for advisers. A greater focus on making sure the offered products are suitable for the specific client being pitched is among the goals of the new rules.
Financial advisers will have to take a one-time general annuity course and specific training for each product they sell. Since the application of the rules may vary from state to state and from annuity provider to annuity provider, there is some concern about unintended consequences. The biggest fear is that some advisers work only with the largest annuity providers (e.g., Prudential, MetLife, Jackson National Life) and avoid offering products from smaller providers. There is no evidence that this has happened yet, however.
Additionally, Primerica is pushing to have changes made to life insurance state licensing exams. The company is claiming that the current exams are too difficult and may be racially biased, according to an article in The Wall Street Journal. Whether the company’s claims have validity is a subject of debate. The article cited a Virginia insurance commissioner as saying that 38% of Primerica’s recruits passed the state’s licensing exams for the two years ended June 2010. Other training programs had pass rates of 51% to 83%.
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