State Roundup

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At the time of this writing, 2014 is coming to a close and only a handful of state legislative bodies are currently deliberating. The vast majority have adjourned, and a fair number of states are already in the process of drafting and pre-filing bills for the upcoming 2015 legislative sessions. Of course, regulations or rules are proposed at the state agency level on a year-round basis, so NAFA tracks legislative and regulatory activity related to the fixed annuity industry, engaging with elected officials or their staff and state regulators when necessary and appropriate with the hope of influencing the ultimate disposition of a rule or law in such a way that is most favorable to our industry.

The following roundup is not inclusive of all the bills and rules that were amended or adopted during 2014; rather, it is intended to provide some highlights of the legislative and regulatory activity related to topics or issues relevant to the sale of fixed annuities.

Annuity Disclosure Rule and/or Annuity Buyer’s Guide

In 2014, a number of states adopted the 2011 NAIC Annuity Model Regulation, which revised the standards for and content of required annuity disclosures and illustrations, and/or the updated 2013 Annuity Buyer’s Guide.1

In addition to these eight states, Iowa previously adopted the revised disclosure rule and Buyer’s Guide in 2013, and the state of Idaho issued a bulletin in 2013 permitting insurers and producers to use either the old version of the guide or the 2013 Guide for Fixed Deferred Annuities. Also, on Nov. 13, 2014, the Maine Bureau of Insurance provided notice that it will consider amending Rule 915, incorporating the 2011 NAIC Annuity Disclosure model rule and repealing its current Annuity Buyer’s Guide in favor of the updated versions.

Annuity Mortality Table/Reserve Liabilities

At the fall 2012 plenary meeting, the NAIC amended Model Regulation 821, relating to the Annuity Mortality Table for Use in Determining Reserve Liabilities for Annuities. The amended model adopts the 2012 Individual Annuity Reserving Table (IAR), as developed by the Society of Actuaries. Prior to the 2012 adoption, the generational mortality table had not been updated since 2000. A good number of states acted in 2014 to adopt the revised 2012 Model Regulation, effective for contracts issued on or after Jan. 1, 2015. These states include Alaska, Alabama, Connecticut, Georgia, Idaho, Illinois, Iowa, Louisiana, Maryland, Minnesota, New York, North Carolina, South Carolina, Texas, Utah, Virginia and Washington.

In addition, the following states are currently considering adoption of the updated IAR Table: Arkansas, Florida, Indiana, Kentucky, Maine, Nebraska, New Jersey, Ohio, Oregon, South Dakota, West Virginia, Wisconsin and Wyoming.

Elder Financial Abuse/Exploitation

We continue to see a fair amount of state legislative and regulatory activity in the area of senior or elder financial abuse and exploitation. In 2014, several states established the financial exploitation of an elder as a crime, or otherwise expanded their existing laws against abuse or financial exploitation of protected persons to include elderly individuals. These states include:

  • Colorado — CO S 98 (Ch. 103): Elder defined as age 70 or older
  • Delaware — DE H 417 (Ch. 438): Elder defined as age 62 or older
  • Iowa — IA S 2239 (Ch. 1107): Elder defined as age 60 or older
  • Maryland — MD H723 (Ch. 421): Elder defined as age 65 or older
  • New Hampshire – NH H 1555 (Ch. 151): Elder defined as age 60 or older
  • West Virginia – WV S 397 (Act 33): Elder defined as age 65 or older

Furthermore, other new elder financial abuse laws include the following:

  • Hawaii — HI S 2345 (Act No. 2014-152): Appropriates $50,000 to the Office of the Securities Commissioner to use for “…educational outreach targeted at kupuna [seniors]… particularly in the areas of indexed annuities, life-settlement annuities, variable annuities, and Ponzi schemes.”
  • Illinois — IL S 2995 (Public Act 833): Provides, among other things, that a civil action against a person for financial exploitation of an elderly person may be brought after the victim’s death.
  • Rhode Island — RI H 7331 (Public Law No. 2014-270): Increases the statute of limitations for financial exploitation of an elder (defined as age 60 or older) from three years to 10 years.

Interstate Insurance Product Regulation Commission (IIPRC)

Arizona enacted AZ H 2482 (Ch. No. 1020), establishing the Interstate Insurance Product Regulation Compact, and making Arizona the 43rd state to join the Interstate Insurance Product Regulation Commission (IIPRC). Additionally, New York has pending legislation to join the Commission (NY A 1983/NY S 2895). States that are not currently IIPRC members include California, Connecticut, Delaware, North Dakota and South Dakota. The District of Columbia is also not a member, and Florida has enacted a non-standard compact.

Suitability in Annuity Transactions

Just two additional states adopted the 2010 Updated NAIC Suitability in Annuity Transactions Model Regulation in 2014: New Hampshire and Wyoming. The New Hampshire amended suitability rule is effective January 1, 2015, and the Wyoming rule went into effect on September 26, 2014. Furthermore, the Maine Bureau of Insurance announced in November 2014 that it would be considering amending its current suitability rule to reflect the 2010 Model Regulation requirements. Including Maine, to date, 35 states and the District of Columbia have adopted the 2010 Updated Model Regulation either in whole or in part.

Unclaimed Life Insurance/Annuity Benefits

In November 2011, the National Conference of Insurance Legislators (NCOIL) passed a resolution supporting a model law dealing with how insurers handle unclaimed benefits from life insurance policies and annuity contracts — the Unclaimed Life Insurance Benefits Act. The act requires insurers to use the Social Security Administration Death Master File (DMF) as a cross-reference against the insurer’s list of in-force life insurance policies and annuity contracts, and once the decedent has been identified and confirmed, to make a good-faith effort to seek out and locate any of the decedent’s beneficiaries. Since 2011, a number of states have adopted this model law or are considering doing so.

While this roundup covers only the highlights of 2014’s regulatory or legislative activities, NAFA will continue to watch for new initiatives as they unfold in 2015.

In 2013, the NAIC adopted three versions of the Annuity Buyer’s Guide: One for fixed deferred annuities, one for variable deferred annuities, and one for general deferred annuities (including both variable and fixed annuities — the “Combination Guide”).

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