Massachusetts has adopted legislation enacting a "best interest" standard on annuity sales and recommendations, according to the American Council of Life Insurers.
In doing so, the Bay State became the 30th state to finalize a rule or law based on the National Association of Insurance Commissioners’ model for annuity sales and recommendations that was originally finalized in 2020. Massachusetts follows Alaska, which adopted its own rule in October.
“Unlike a fiduciary-only approach, these measures ensure that all savers, particularly financially vulnerable middle-income Americans, can access information about different choices for long-term security in retirement,” said ACLI President and CEO Susan Neely and National Association of Insurance and Financial Advisors (NAIFA)-Massachusetts President Josh O’Gara, in a statement. “We hope other states add to this nationwide effort and adopt these sensible protections. Consumers working to secure their family’s financial future should benefit from a best interest standard of care no matter where they live.”
The NAIC’s 2020 model, entitled “Suitability in Annuity Transactions Model Regulation,” offered states a template to regulate annuity sales and recommendations in a way that would align with the Securities and Exchange Commission’s Regulation Best Interest, which governs sales and recommendations of securities on the federal level.
Like the SEC’s rule, the NAIC’s model stipulates that agents cannot put their own financial interests ahead of the consumer’s, and the model mandated insurers and agents meet a care, disclosure, conflict of interest and documentation obligation, akin to the SEC’s regulation.
Iowa became the first state to pass its own rule based on the NAIC’s model in 2020, with more than two dozen states following in its footsteps. Recently, in addition to Alaska, Hawaii signed legislation modeled on the NAIC standard in June, and Colorado Insurance Commissioner Michael Conway adopted a similar rule in August.
