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2018 CEFLI Summit Meeting

The Future of Sales Standards in the Life Insurance Industry

Fairmont Millennium Park Hotel

Tuesday, May 1 – Chicago, Illinois

The meeting explored several different developments related to evolving sales standards including: the efforts undertaken by the NAIC to consider possible modifications to the NAIC Suitability in Annuity Transactions Model Regulation, the re-proposal of amendments to Regulation 187 in New York, the recently proposed rules issued by the SEC to guide the conduct of broker-dealers and investment advisers in working with retail customers, the future of the DOL Fiduciary Rule and its implications for compliance strategies and concluded with the session to explore the future implications of these developments.

In our session to discuss the NAIC efforts to consider possible modifications to the NAIC Suitability in Annuity Transactions Model Regulation, NAIC Annuity Suitability Working Group Chair and Idaho Director Dean Cameron commented that the NAIC is working closely with the SEC, DOL and FINRA in exploring ways in which they can pursue “harmonization” in applicable regulatory standards.  Director Cameron indicated that the NAIC will be developing a Drafting Session in late May/early June to consider comments submitted on the most recent draft of revisions to the NAIC Suitability in Annuity Transactions Model Regulation with the goal of developing a final draft, so it can be submitted for review and evaluation by the SEC during its comment period pertaining to the issuance of its recent set of proposed rules.

In our session to discuss the re-proposed amendments to New York Regulation 187, New York Department of Financial Services’ Deputy Superintendent James Regalbuto provided some background information to explain the rationale underlying the re-proposal which was issued in response to comments received by the NYDFS on its initial set of proposed amendments.  Mr. Regalbuto confirmed that the best interest standard contained within the re-proposal will be applicable to life insurance as well as annuity products.  The NYDFS will continue to pursue adoption of the re-proposed amendments to Regulation 187 notwithstanding the work that is being undertaken by the SEC and the NAIC with respect to their own sales standards initiatives.

In our session to explore the recent rule proposals issued by the SEC, the discussion focused on the need for individuals and companies to submit comments on these proposals.  It was noted that Regulation Best Interest did not include a definition of “best interest” in the proposal.  The session also noted that some industry media observers have identified Regulation Best Interest as “suitability plus.”  Nevertheless, it was acknowledged that the SEC’s rule proposals still will create a lack of uniformity for sales standards across the financial services industry and it is likely they will continue to maintain distinctions between sales standards for securities products versus insurance products.

In our session to examine the future of the DOL Fiduciary Rule, it was noted that the AARP and three other states recently filed a request for an “en banc” hearing before the US Court of Appeals for the Fifth Circuit regarding its recent decision to vacate the DOL Fiduciary Rule.  (Subsequent to the Summit Meeting, the 5th circuit denied this request for a re-hearing.)  A panel of Chief Compliance Officers also indicated that they are taking a “wait-and-see” approach with respect to the final resolution of the DOL Fiduciary Rule.  Given the resources that were dedicated to developing appropriate compliance programs to comply with the provisions of the DOL Fiduciary Rule, it is likely that many companies will continue to maintain these compliance strategies in the future.

Our last session examined the future impact of these evolving sales standards upon current practices in the life insurance industry.  The discussion identified several common themes across current sales standards initiatives including the need to identify and disclose various conflicts of interest, the need to consider alternatives and to be able to compare products types, a movement toward compensation transparency and an acknowledgment of the challenges that will lie in attempting to implement various sales standards across disparate compliance systems.

The feedback received from the Summit Meeting was outstanding!

CEFLI offers these types of Forums to encourage open dialogue between life insurance company representatives and applicable regulators, in an effort to share perspectives and insights concerning the practical effect that future sales standards may have upon the life insurance industry.

CEFLI will continue to monitor these developments closely and will report updated information to its member companies.

We hope you will be able to join us for a future CEFLI Summit Meeting.

For the final program click here.

For more information and to register please follow this link:http://www.cvent.com/d/1gq7vt


Meeting Materials

1.) NAIC Suitability in Annuity Transactions Model Regulation-Revisions

2.) Re-Proposed 1st Amendment NY Regulation 187

3.) FINAL SEC Session 2018 CEFLI Summit Meeting

4.) DOL Rule and Compliance Strategies Session 2018 CEFLI Summit Meeting