ACLI Draws Ire of Consumer Groups over Annuity Sales Standard
More than a dozen consumer groups have slammed the American Council of Life Insurers’ proposal on managing conflicts of interest in annuity sales, InvestmentNews writes.
In April, the National Association of Insurance Commissioners began a review of its suitability standard in regard to annuity sales ahead of the Department of Labor’s fiduciary rule. The first phase of the rule went into effect June 9 and in part targets inappropriate sales of annuities, the publication writes.
The ACLI has since proposed a “uniform standard of care” that could be enforced by the SEC, the DOL and state regulators. But consumer groups say the proposal is too broadly worded to be effective, according to InvestmentNews.
ACLI proposes that insurance brokers and reps be considered as acting in the best interest of consumers if they disclose all their fees and compensation, steer clear of misleading statements and avoid, disclose or “reasonably” manage “material conflicts of interest,” according to the publication. In a letter to the NAIC, 14 consumer groups, including the AFL-CIO, the Center for Economic Justice and the Consumer Federation of America, write that the proposal gives too much leeway to companies in how they disclose, manage and avoid conflicts, according to InvestmentNews.
The letter, which was also signed by 10 NAIC consumer representatives, indicates that such an approach would lead to firms addressing potential conflicts of interest only through disclosure, the publication writes. Meanwhile, the letter claims, “overwhelming evidence” points to the ineffectiveness of disclosure alone in shielding consumers from conflicts, InvestmentNews writes.
Instead, the consumer groups are urging the NAIC to opt for "substantive prohibitions on conflicts of interest, as opposed to 'managing' or 'disclosing'" them, according to the publication.
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