Is there sufficient regulation to protect consumers from misleading sales practices or unsuitable sales?

To sell fixed annuities you must hold an insurance license.

Fixed annuities are heavily regulated and enforced by fifty state statutory reserve guidelines, minimum non-forfeiture laws, insurance company investment laws, GAAP reporting standards, and Actuarial Guideline 35.

The marketing and sales of fixed annuities are also highly regulated by state insurance laws, including comprehensive insurance trade practices provisions covering misleading presentations, false advertising, full disclosure, etc.

Very importantly and uniquely, all fixed annuity insurance contract must allow a “free look period” that begins when the contract is received by the customer during which he or she may cancel the contract without any penalties. The insurance company does not require any reason or rationale for the cancellation just written, documented notice of the desire to do so.

Each state requires that every licensed agent complete continuing education to ensure that they have the latest knowledge of laws, products and insurance practices.

In addition, the NAIC adopted the Consumer Protections in Annuity Transactions Model Law in 2003, covering senior citizens, and has since adopted an expansion to include consumers of every age. Over thirty states have enacted the model and six more states are set to do so. We encourage the state of California to do so.

Furthermore, the two states holding over 67% of the total premiums for indexed annuities require that those businesses domiciled in their state follow the model in ALL states in which they do business. Most importantly, insurers are voluntarily requiring their agents and brokers in all states, to follow suitability standards because it is good for the customer and good for business.

NAFA has sponsored meetings and information on this consumer protection law, and its Board of Directors voted unanimously on March 2nd to support adoption and passage of the latest model. NAFA supports such laws, which protect consumers from unethical and misleading sales practices.