In an effort to stop abusive sales of annuities to seniors, the National Association of Insurance Commissioners (NAIC) has adopted a model regulation designed to help protect senior consumers when they purchase or exchange such products.
Under the new rules, which cover sale of fixed and variable annuities, insurance agents and sales representatives selling annuities to clients age 65 or older must have reasonable grounds for believing that the annuity is appropriate for the consumer. In addition, the agent must make reasonable efforts to obtain information about the senior consumer's financial status, tax status, investment objectives, and other information that should be considered in making purchasing recommendations.
Insurers also must design compliance standards to ensure that senior clients are getting appropriate advice and that agents are following the rules.
"The hope of the regulation is that companies, producers, and any other supervising entities will look at their annuity products and develop more specific advisories with respect to issues that need to be communicated with senior citizens," said Linda Lanam, vice president of annuities at the American Council of Life Insurers.
The model regulation must now be adopted by the states, either through legislation or departmental rules, depending on the state.
To download the NAIC press release on the model regulation in Word format, click here.
For an article on the regulation in Financial Planning Interactive, go to: www.financial-planning.com/pubs/fpi/20030918101.html (Article may be only temporarily available.)
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