COVER STORY IS SUITABILITY BEING PUSHED ASIDE?
State
Key Restrictions
Compensation Impact
Status
New York
• Only the consumer’s best interests can be factored into a recommendation.
The regulation does not ban commission sales, but the producer must be able to show that the product was the most appropriate fit for the consumer’s financial needs and objectives.
Approved and going into effect in August 2019 for annuity sales, and six months later for life insurance sales.
The regulation does not ban commission sales, but the producer must be able to show that the product was the most appropriate fit for the consumer’s financial needs and objectives.
Legislation creating the regulation was passed in the summer 2017. Nevada officials accepted public comment on the rule details through March 1 and are expected to finalize those rules this year.
• Insurers required to develop training for producers. Rules cover insurance agents. • Cannot use “financial advisor” or “financial planner” titles without proper licensing.
Nevada
• Establishes a fiduciary duty status on brokers and registered reps for virtually all activities related to customer interaction. • Permits an “Episodic Fiduciary Duty Exemption” for a variety of situations. • Outlines lengthy list of fiduciary breaches, including excessive fees, failure to provide pertinent documents and putting own interest ahead of client’s. • Does not cover insurance agents.
Maryland
• Makes both brokers and insurance agents fiduciaries with “a duty to act in the best interest of the customer without regard to the financial or other interest of the person or firm providing the advice.”
The regulation does not ban commission sales, but the producer must be able to show that the product was the most appropriate fit for the consumer’s financial needs and objectives.
Legislation was introduced in February 2019 and faces a long road to adoption.
New Jersey
• Would implement a uniform fiduciary duty status on all broker-dealers, agents, investment advisors and investment advisor representatives registered to do business in the state.
No firm details on compensation limits.
A Notice of Pre-Proposal was filed by the New Jersey Bureau of Securities on Oct. 15, 2018. Public comment was accepted for two months. An actual rule had yet to be released by the time this issue went to press.
• Details are scant, but Gov. Phil Murphy said New Jersey will develop “the strongest investor protections in the nation.”
sales processes for the DOL rule, said especially for the insurance products and pulled the NAIC in its direction. CEO Scott Perry. Those expenses includ- the insurance industry, is at the NAIC,” ed developing a proprietary “Amerilyzer” he said. New York State Of Mind software tool to document Everyone in the industry New York previously adopted tougher client contacts and keep elecis keeping a close eye on the cybersecurity standards than the NAIC tronic records. New York Department of was considering at the time. The NAIC’s Once the DOL rule was Financial Services. For startfinal cybersecurity model ended up tossed, AmeriLife dropped ers, New York regulators are resembling the New York rules. everything and went back to far ahead of the game, with Although some insurers vow not to its old way of doing business, annuity sales rules set to take sell products in New York, Perry said Perry said. But uncertainty effect in August. Life insurAmeriLife will adapt. costs money, and it is someance sales must comply by “We’re going to take the lead from the Scott Perry thing the company wants to February 2020. carriers who do business in New York, avoid, he added, even if that means makSecondly, the New York rules are very and we’re going to follow what they being concessions on regulations. tough and would essentially lieve they want their distribu“We can’t just ignore the winds that do away with the suitability tion to follow,” he said. “Our are blowing in a certain direction,” Perry concept. The rules require proattitude is we would do what said. “To push back on every other regu- ducers always to place the cuswe need to do to continue to latory body dipping their toe in this wa- tomer’s interests ahead of their do business there.” ter seemed to us to be a little naïve.” own. Insurers are responsible New York regulators are So AmeriLife is supporting the NAIC for establishing a training regnot without industry support. working group. It would be a major prob- imen for their producers, who Valmark Financial Group is lem for the company, Perry stressed, if will be expected to keep suban umbrella company with Larry J. Rybka states splintered off into a variety of reg- stantial documentation. an independent broker-dealer, ulatory concepts. Former DFS Superintendent Maria as well as insurance and registered in“We certainly aren’t in favor of a patch- Vullo challenged NAIC officials to adopt vestment advisor divisions. CEO Larry work approach and to the degree that New York regs in their model annuity J. Rybka favors making New York stanwe feel we can get a uniform approach, sales rule. If that happens, it would not dards the law of the land. the best place we think we can get that, be the first time that New York regulators “Maybe this change is really a good 20
InsuranceNewsNet Magazine » April 2019
