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DOL Rule Delay a Boon for Indexed, Variable Annuities

August 23, 2017

The proposed 18-month delay to the Department of Labor’s fiduciary rule is a big relief to distributors of indexed and variable annuities, InvestmentNews writes.

The rule, which was originally scheduled to go into full effect January 1, would have cut sales in indexed annuities by up to 10% this year and up to 20% in 2018, according to estimates from insurance industry association Limra cited by the publication. Sales of variable annuities were projected to fall by up to 15%, according to LIMRA, InvestmentNews writes.

While the rule went into only partial effect in June, the January implementation date would have kicked in the rule’s best interest contract exemption provision, which did not spell out how independent insurance agents could go on selling commission-based products, according to the publication. That was due to the fact that independent marketing organizations, which independent insurance agents normally employ to peddle indexed annuities, weren’t recognized as one of the four financial institutions that the BICE covered, InvestmentNews writes.

But now that the final implementation of the rule has been pushed back to July 1, 2019, distributors of indexed annuities are “definitely breathing a sigh of relief,” Sheryl Moore, president and CEO of market research firm Moore Market Intelligence, tells InvestmentNews, calling the delay a “Hail Mary” for them.

What’s more, the DOL will likely create product-specific provisions during the delay that could ease the sale of indexed and variable annuities, Jamie Hopkins, a professor in the retirement income program at the American College of Financial Services, tells the publication. Prospects for annuity sales may further improve because the DOL may do away with the BICE requirement altogether, according to InvestmentNews.

By Alex Padalka
  • To read the InvestmentNews article cited in this story, click here.
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