According to a recent article from InsuranceNewsNet, several states are considering the addition of a “fiduciary duty” on insurance agents in the form of new regulations, and many aren’t too happy about it. Majority of the 14 states talking about regulation are big, heavily populated states where progressives are in key political positions, like California and New Jersey.
“There’s a narrative that we have to fix something but there’s no evidence that there’s something that needs fixing,” said Kim O’Brien, CEO of AssessBEST, a compliance software company. O’Brien recently hosted an industry webinar for the Fixed Annuity Consumer Choice campaign, a group that is planning a full offensive to counter the best interest movement.
“The reality is that the annuity market is very strong, and what they’re doing will really harm agents and consumers,” O’Brien added.
The state of New York is leading the way with its best interest rule, which covers both annuities and life insurance, slated to take effect in August 2019. 2 lawsuits have already been filed to stop the rule, one by the National Association of Insurance and Financial Advisors’ New York chapter, and the other by The Big I and the Professional Insurance Agents of New York. The combination of the two lawsuits is expected in the coming weeks, according to Scott Hobson, director of government relations for the Big I NY. Hobson said that his organization has several concerns, mainly that New York Department of Financial Services’ regulators will be able to “unilaterally” extend the best interest rule to any and all insurance transactions. He claimed that with a rule on the books, they could expand it and bypass the normal public comment process.
“We expect that many decisions would be second guessed, resulting in litigation, claims and stuff of that nature,” said Hobson.
Big I NY and PIANY called the new standard “wildly subjective,” arguing that it fails to instruct agents/brokers whose best interest, the policyholder, beneficiary, or owner of a policy, they must consider. A decision on the lawsuit is expected by the middle of the first quarter of 2019.
New Jersey is also expected on the battlefield after publishing a “pre-proposal notice” in October, seeking comments. The New Jersey plan is short on details but would impose a fiduciary duty on all investment professionals in the entire state.
Dwight Carter, operator of an annuity marketing organization in Raleigh, N.C. who also chairs the FACC, said that it is expected to be a big year for annuity sellers to fight against being demonized.
“We have some work to do,” he said. “The New York situation is a forerunner on what we’re going to have to deal with. We’re going to be positioned and we’re going to be classified and we’re going to be deemed to be not in the best interest of the consumer.”
Written by Rachel Summit