The National Association of Insurance Commissioners and insurance trade groups continued to push back against the Biden Administration’s proposed fiduciary rule, saying it would reduce consumers’ access to vital retirement investment advice.
The NAIC, in a statement, said it typically does not comment on rule proposals of fellow regulators but decided to do so because the Department of Labor’s proposed rule could impact consumers significantly.
“We are disappointed that the DOL did not engage or coordinate substantively with NAIC members — the chief insurance regulators from the 50 states, the District of Columbia, and the U.S. territories — before promulgating the current proposed rule,” it said. “While DOL has interacted with NAIC staff and members, those discussions were focused almost exclusively on aspects of the NAIC model and provided no opportunity for discussion of DOL’s own work or thinking.”
The department only engaged with insurance commissioners after it released the text of the proposed rule, showing little regard to the overlapping responsibilities the state and federal regulators share, it said.
In addition, the statement again noted the NAIC’s disappointment with the administration’s characterization of state consumer protections around annuity sales as inadequate and providing “misaligned incentives.”
“The rationale and justification for DOL’s work should stand on its own as complementary to robust state efforts, and not mischaracterize differences in regulatory philosophy as an absence of regulatory competence or efficacy in this space,” it said.
The department said last year that regulation and protection of consumers varied state by state, and their consumer protections were “inadequate”.
An attempt to obtain comment from the department was not immediately successful.
Meanwhile, at a hearing of the House Capital Markets Subcommittee of the House Financial Services Committee, Susan Neely, president and Chief Executive Officer of the American Council of Life Insurers, urged lawmakers to dump the department’s fiduciary proposal.
“While Congress and the president are advancing policies to help close the retirement savings gap, DOL’s fiduciary rule threatens to do the opposite,” she said. “Expanding the definition of an investment advice fiduciary will hurt those who need retirement security most by creating a barrier between low- and moderate-income savers and financial professionals.”
Insurers are not fighting the proposed rule not because it would preserve a “profitable status quo,” she said, but because it ignores “substantive consumer protections,” such as the NAIC’s suitability in annuity transactions model act.
The vast majority of firms and financial professionals already act in the best interest of their clients, said Jason Berkowitz, chief legal and regulatory affairs officer at the Insured Retirement Institute.
“To be clear, we believe all financial professionals should be required to act in their clients’ best interest when providing guidance on retirement savings strategies and products, as they are required to do under the U.S. Security and Exchange Commission’s Regulation Best Interest standard and substantially similar rules that have been adopted by 41 states and counting,” Berkowitz said at the hearing.
The IRI supports those measures, which he said provide regulators with the tools they need to protect retirement savers and address the conduct of bad actors.
“With these rules in place and being actively enforced,” Berkowitz said, “the DOL’s proposal is a solution in search of a problem.”