{"id":15935,"date":"2019-06-24T08:12:00","date_gmt":"2019-06-24T12:12:00","guid":{"rendered":"https:\/\/lifeinsurance-orleans.ca\/Life-Insurance-Blog\/laws-regulation-target-insurance-products\/"},"modified":"2019-06-24T08:12:00","modified_gmt":"2019-06-24T12:12:00","slug":"laws-regulation-target-insurance-products","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2019\/06\/24\/laws-regulation-target-insurance-products\/","title":{"rendered":"Laws, Regulation Target Insurance Products"},"content":{"rendered":"\n<div><img decoding=\"async\" src=\"http:\/\/insurancenewsnetmagazine.com\/images\/inn_default_logo.gif\" class=\"ff-og-image-inserted\"><\/div>\n<p>\nIndustry lobbyists are tallying long hours tracking regulatory and legislative efforts that threaten to substantially change the sale of insurance products.<\/p>\n<p>\nRule changes are advancing on three fronts:<\/p>\n<ul>\n<li>\nThe Securities and Exchange Commission approved Regulation Best Interest, a standard of conduct for brokers, by a 3-1 vote.<\/li>\n<li>\nTwo National Association of Insurance Commissioners\u2019 working groups are inching toward changes to rein in illustrations.<\/li>\n<li>\nA Senate bill would require health benefits brokers to disclose their commissions and other incentives they receive.<\/li>\n<\/ul>\n<h2>\nSEC Rule: Bold Or Feckless?<\/h2>\n<p>\nRegulation Best Interest, a three-part rulemaking package aimed to establish a standard of conduct for broker-dealers, will better protect investors, the SEC said.<\/p>\n<p>\nThe newly adopted rule comes just one year after the Department of Labor\u2019s fiduciary rule was vacated.<\/p>\n<p>\nThe timing is about all the two pieces of legislation have in common. The final version of Reg BI is a whopping 771-page tome, noticeably longer than the proposal, of precedence, interpretation and justification for omissions and changes.<\/p>\n<p>\nTakeaways from the legislation:<\/p>\n<p>\n<strong>1. There\u2019s still no definition of \u201cbest interest\u201d<\/strong> \u2014 Noticeably missing from the proposed rule, the SEC has chosen not to include a definition of the phrase in its final rule, either.<\/p>\n<p>\n<strong>2. Title reform dropped<\/strong> \u2014 the final rule omitted a section of the proposed rule restricting the use of adviser\/advisor.<\/p>\n<p>\n<strong>3. Maintains distinction<\/strong> \u2014 while the changes embrace some of the fundamentals of a fiduciary standard for broker-dealers, the rule maintains separate standards for investment advisors and broker-dealers.<\/p>\n<p>\nSince the defeat of the DOL rule, states such as New York and Nevada have enacted their own fiduciary rules. The SEC declined to say during the vote if the federal Reg BI rule would preempt those enacted by state legislatures, pointing to judicial proceedings to determine the future of the state-enacted laws.<\/p>\n<p>\nFor firms worried about transitioning to a Reg BI-compliant world, SEC Chairman Jay Clayton said in his opening remarks of the vote, the SEC will establish committees to assist firms with the implementation of the adopted rules.<\/p>\n<h2>\nIllustrations An Issue<\/h2>\n<p>\nWhen the NAIC created Actuarial Guideline 49 in 2015, insurers were not offering indexed universal life with \u201cmultipliers\u201d and \u201cbonuses.\u201d Critics say these options were quickly created to get around AG 49.<\/p>\n<p>\nAG 49 was developed to provide insurance carriers a more uniform method for calculating maximum illustrated rates on IUL products and to help consumers better understand indexed life insurance product illustrations.<\/p>\n<p>\nAG 49 states that: \u201cIf an insurer engages in a hedging program for index-based interest, the assumed earned interest rate underlying the disciplined current scale shall not exceed 145% of the annual net investment earnings rate.\u201d<\/p>\n<p>\nThe multipliers and bonuses are just the natural \u201cinnovation\u201d of the industry, said Scott R. Harrison, who represents insurers such as Lincoln Financial and Pacific Life, during a recent conference call. That prompted a sharp response from Birny Birnbaum, executive director of the Center for Economic Justice.<\/p>\n<p>\n\u201cSince AG 49, we\u2019ve now seen products developed specifically for the purpose of juicing the illustrations,\u201d he said. \u201cThat\u2019s not what I call being \u2018innovative.\u2019 That\u2019s what I call \u2018gaming the system.\u2019\u201d<\/p>\n<p>\nThe IUL Illustration Subgroup accepted comments on four questions through June 28. Regulators hinted that opening the overall life insurance illustration model law is on the table, which would likely be a lengthy and acrimonious process.<\/p>\n<p>\nA second subgroup \u2014 the Annuity Disclosure Working Group \u2014 is concerned that consumers are being misled by unrealistic indexed annuity illustrations. It is studying a proposal to double the time indexes must be in existence to be used in annuity illustrations from 10 to 20 years.<\/p>\n<p>\nThe index illustration issue rose in importance as many insurers developed their own proprietary indices in recent years to respond to the popularity of indexed annuities with cautious clients. These indices rely on other indexes to create a hypothetical historical record of return.<\/p>\n<p>\nIndustry representatives say the 20-year requirement would eliminate about 70% of the indexes being used.<\/p>\n<p>\n\u201cIt\u2019s not clear to us how we would manage that disruption,\u201d said Jason Berkowitz, chief legal and regulatory affairs officer for the Insured Retirement Institute, during a June conference call.<\/p>\n<p>\nThe working groups are up against a deadline with the NAIC Summer Meeting set to begin Aug. 3 in New York City.<\/p>\n<h2>\n\u2018Really Appalling\u2019<\/h2>\n<p>\nHealth insurance broker commissions have been disappearing since the Affordable Care Act went into effect. But apparently that\u2019s not enough to satisfy lawmakers. Now a Senate bill includes a provision that would require health benefits brokers to disclose their commissions and other incentives they receive from the insurance industry.<\/p>\n<p>\nThe Lower Health Care Costs Act was introduced by Sen. Lamar Alexander, R-Tenn., and Sen. Patty Murray, D-Wash. The bill takes aim at a number of issues, including surprise medical bills, high drug prices and public health problems. Buried in the bill is a requirement that health benefits brokers reveal fees and other enticements they receive from the insurance industry.<\/p>\n<p>\nRepresentatives of two health agents associations said they are in favor of transparency, but questioned how forcing brokers to do even more disclosure would bring down the cost of health care.<\/p>\n<p>\n\u201cIt\u2019s really appalling because our members have been fighting to get paid,\u201d said Ronnell Nolan, CEO of Health Agents for America. \u201cAnd that bill is important. Lowering health care costs is what we want for our clients. But how can anybody point the arrow toward our members and say we\u2019re part of the problem? We\u2019re not part of the problem. Agents have been losing money since the passage of the ACA.\u201d<\/p>\n<p>\nShe cited research from Louisiana Insurance Commissioner James Donelon that showed broker commissions made up about 5% of insurance carriers\u2019 total spending prior to the ACA. \u201cAnd we know it\u2019s gone way down since then,\u201d she added.<\/p>\n<p>\nNolan said her group is asking Alexander to remove that provision from the bill.<\/p>\n<p>\nThe National Association of Health Underwriters has not taken an official position on the bill, but the association \u201cis definitely in favor of transparency of costs on all levels, including broker compensation,\u201d said Marcy Buckner, vice president of government affairs. However, she added, NAHU is concerned that the provision duplicates broker compensation disclosures that are already in effect.<\/p>\n<p>\n\u201cOur members are questioning what else is possible for them to be required to disclose. They are already subject to disclosure in the group market for groups of more than 100 \u2014 the Form 5500 requirement. Also, often when they\u2019re working with the larger groups, plan agreements are pages and pages long and include everything that goes into that plan detail. Compensation disclosure is part of that. And certain states have required disclosures.\u201d<\/p>\n<p>\nDespite the disclosure provision, Buckner said, NAHU is positive about some aspects of the bill. The bill takes aim at surprise medical costs and high drug prices, which she said will bring down health care costs for consumers.<\/p>\n<p> <a href=\"http:\/\/insurancenewsnetmagazine.com\/article\/laws-regulation-target-insurance-products-3692\">Read the original article at InsuranceNewsNetMagazine.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Industry lobbyists are tallying long hours tracking regulatory and legislative efforts that threaten to substantially change the sale of insurance products. Rule changes are advancing on three fronts: The Securities and Exchange Commission approved&#46;&#46;&#46;<\/p>\n","protected":false},"author":578,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/15935"}],"collection":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/users\/578"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/comments?post=15935"}],"version-history":[{"count":0,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/15935\/revisions"}],"wp:attachment":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media?parent=15935"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/categories?post=15935"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/tags?post=15935"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}