The Iowa Insurance Division adopted a regulation Monday requiring annuity agents to act in the best interest of their clients.
The standard requires the annuity agent to "only make recommendations that match the particular Iowan's needs, objectives and situation without placing the producer's or the insurer's financial interest ahead of the consumer's interest."
The regulation, which will be published in the Iowa Administrative Bulletin on June 3 and goes into effect Jan. 1, follows the model established by the National Association of Insurance Commissioners in February and the Securities and Exchange Commission's best-interest package. The SEC package, commonly known as Reg BI for its centerpiece best-interest standard that aims to compel brokers to put clients' financial interests ahead of their own and requires them to mitigate financial conflicts, goes into effect June 30.
"Iowans expect their financial professional to act in the consumer's best interest when recommending an annuity," said Doug Ommen, Iowa insurance commissioner, in a statement. "Iowa not only expects it, but we will require it."
The insurance industry applauded the move. "Iowa is setting the pace for states in adopting enhanced, harmonized protections for consumers who purchase annuities for lifetime income," said Susan K. Neely, president and CEO of the American Council of Life Insurers, in a statement. "Retirement savers should be confident that financial professionals are acting in the best interest of consumers. The new rule achieves this goal."
Added Jason Berkowitz, chief legal and regulatory affairs officer at the Insured Retirement Institute: "Given the thorough and transparent process followed by the NAIC to develop a workable best interest standard for annuity recommendations, and the significant leadership role played by Commissioner Ommen in that effort, it is appropriate that Iowa is the first state to formally adopt the updated model. We hope the other states will soon follow Iowa's lead."
When the Iowa proposal was introduced in late February it also included a best-interest standard for securities agents. But during the proceeding comment period, stakeholders requested the insurance division delay that portion of the regulation due to the COVID-19 pandemic. "We have decided that is the appropriate course," Mr. Ommen said. "I anticipate proposing best interest securities standards again later this summer."