Alabama and Rhode Island are the most recent states to issue regulations setting forth a best interest standard for annuity producers in recommending an annuity to their customers.
Both regulations follow the National Association of Insurance Commissioners’ (NAIC’s) model regulation by requiring producers to act in the consumer’s best interest and not place the producer’s financial interest ahead of the consumer’s.
Prior to recommending an annuity, producers are required to disclose the scope and terms of their relationship with the consumer, how the producer is being compensated and any material conflicts of interest.
Like the NAIC model regulation, the Alabama and Rhode Island regulations do not create a fiduciary obligation or relationship with the consumer and producers are not subject to civil liability for breaching any fiduciary standard of conduct.
The Alabama regulation is still in its proposed form, with comments due December 7, 2020. If finalized without delay, the regulation would take effect on January 1, 2021.
The Rhode Island regulation has been finalized and takes effect on April 1, 2021. A copy of the updated state chart can be found here.
This article originally appeared on The National Law Review.
