The Arizona House of Representatives has approved a bill to establish a new regulation governing annuity sales that requires financial professionals to act in the best interests of the consumer.
Arizona Governor Doug Ducey now must approve the legislation, which passed the Arizona House by a margin of 36 to 24. With this move, Arizona is following in the footsteps of Iowa, which earlier this month adopted a regulation to require annuity agents to act in the best interest of their customers. Both pieces of regulation are based on a model best-interest framework adopted in November by the National Association of Insurance Commissioners (NAIC).
The NAIC is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, Washington, D.C., and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer reviews and coordinate their regulatory oversight.
The Arizona legislature’s passage of the regulation was immediately hailed by the Insured Retirement Institute (IRI), which has advocated for nationwide adoption of the NAIC framework.
“This is another victory for consumer protection and choice,” says Jason Berkowitz, IRI chief legal and regulatory affairs officer. “The bill requires insurance producers to act in the best interest of their clients when making annuity recommendations. IRI is grateful to the legislation’s prime sponsor, Representative David Livingston (R-22nd District), for leading the effort.”
IRI supports the NAIC framework primarily because it closely aligns with the U.S. Securities and Exchange Commission (SEC)’s Regulation Best Interest (Reg BI), which takes effect on June 30. Included in the Arizona legislation is language to provide a safe harbor for all insurance producers who are subject to, and comply with, equivalent or greater standards such as Regulation Best Interest or the Investment Advisers Act.
“The alignment of federal and state regulation mitigates against conflicting rules for financial professionals who provide important advice and products to consumers,” Berkowitz says. “Arizona’s new regulation, like the NAIC model and Reg BI, preserves consumers’ choice of the financial professional and products that best meets their needs.”