IIAV Comments on BOI Regulatory Proposal – Opposes Changes That Could Put Agents in Legal Jeopardy
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With what certainty can you provide an insurance product to a consumer and tell them that this product is “in their best interest” and have that decision withstand the test of time?
That’s precisely the foundation of a regulatory proposal from the Bureau of Insurance to the Administrative Code entitled Rules Governing Suitability in Annuity Transactions. The recommended changes incorporate provisions contained in a model regulation proposed by the National Association of Insurance Commissioners.
“Some may believe that requiring producers by law to act in the ‘best interest’ of a consumer is innocuous and unremarkable,” noted IIAV’s comments on the proposal, “but the reality is that the establishment of such a standard would create considerable uncertainty and have other adverse consequences.”
IIAV’s comments challenged the proposed regulatory language as new, unclear and undefinable that on the one hand asserts that the agent would not have a fiduciary duty but the regulations don’t establish the difference between such duty and a best interest standard. IIAV noted that unfortunately such disputes can land the agent in a courtroom proceeding where their decisions can be second guessed with the value of hindsight.
“Fundamentally, we had a number of problems with the proposal,” notes Bob Bradshaw, IIAV President & CEO. “First, the introduction of such a nebulous standard of ‘best interest,’ the impact such a standard would have on Virginian’s reliance on Common Law, and the ability of the Bureau to make such a substantive change through regulation and not statute — if the Bureau can make such a regulatory change that impacts the sale of annuities, why could they NOT make such a regulatory change that impacts the sale of property/casualty products?”
IIAV’s national association, IIABA, has been raising alarms about the regulatory proposal for years directly with the NAIC and as introduced in a couple of other states. While some of the measures contained in the proposed regulation may be appropriate, the concerns raised by IIABA and IIAV have yet to be addressed.
“With a subjective standard as ‘best interest’ on financial products that are subject to future performance, I fear that this proposal may be more in the ‘best interest’ of the trial lawyer lying in wait,” stated Bradshaw.
