The Arkansas Insurance Department held a hearing Thursday afternoon to consider whether the state should permanently adopt modifications to a regulation known as Rule 82.
In basic terms, Rule 82 sets forth the standards and requirements that an insurance producer or an insurer must follow when recommending or selling an annuity product to a consumer in the state. The modifications in question would move Rule 82 into close alignment with the model annuity transaction suitability framework finalized early this year by the National Association of Insurance Commissioners (NAIC).
By way of background, the NAIC is the United States’ main standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer reviews and otherwise coordinate their regulatory oversight.
Supporters of the updated NAIC best interest framework include the Insured Retirement Institute (IRI), which says the revised suitability model is appropriately consistent with the U.S. Securities and Exchange Commission (SEC)’s Regulation Best Interest (Reg BI). In fact, the NAIC model includes IRI-recommended language to provide a safe harbor for all insurance producers who are subject to, and actually comply with, equivalent or greater conduct standards, such as Reg BI or the Investment Advisers Act. Supporters say this approach will help to avoid duplicative compliance requirements for those producers who already comply with rigorous standards.
In a statement shared with PLANADVISER ahead of the Arkansas hearing, Jason Berkowitz, IRI chief legal and regulatory affairs officer, spoke favorably of the state’s consideration of the NAIC framework.
“Similar to Reg BI, the regulation will require insurance producers to act in the best interest of the consumer under the circumstances known at the time a recommendation is made, without placing the producer’s or the insurer’s financial interest ahead of the consumer’s interest,” Berkowitz says. “In addition to the enhancements made to the applicable standard of conduct and supervisory requirements, the revised model also reflects important adjustments to the training provisions and the FINRA [Financial Industry Regulatory Authority] safe harbor included in the prior version of the model.”