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A group of 29 plaintiffs claim that Penn Mutual Life Insurance Co. and several co-defendants ran a tax-avoidance scam around whole life insurance policies.

The amended complaint filed last week in U.S. District Court for the Central District of California alleges fraud and negligence, as well as violations of the Racketeer Influenced and Corrupt Organizations Act (RICO).

Plaintiffs, which come from states around the country, ask the court for $23.5 million in damages.

“Unbeknownst to the Plaintiffs, these tax avoidance and related scams were a sham and their purported tax advantages illusory and/or illegal,” write attorneys from the Los Angeles firm, Holmes, Athey, Cowan & Mermelstein.

The defendants include former Penn Mutual agent Randall Scott Boll, who was indicted in 2021 on four counts related to violations of federal money laundering laws and banking regulations.

Boll pleaded guilty to one count of conspiracy to cause a financial institution to fail to file currency transaction reports and to structure financial transactions. He was sentenced to one day behind bars in California, court records say, and two years of supervised release.

According to court updates, Boll is living in Arizona and pursuing a divinity degree at Liberty University. He could not be reached for comment. Penn Mutual did not respond to messages seeking comment.

‘Racketeering enterprise’

The lawsuit alleges that Penn Mutual and Boll, along with several other law, lending, accounting and financial planning firms also named as defendants, constituted a “High-Premium Insurance Enterprise.”

“The HPI Enterprise was an organization consisting of individuals and business entities associated for the common or shared purpose of selling, promoting and/or marketing high-premium life insurance policies and related products to plaintiffs through deceptive and misleading sales tactics and materials, and deriving profits from those activities,” the lawsuit reads.

Penn Mutual whole life policies were aggressively marketed as offering “significant tax advantages,” plaintiffs say. “Boll and other members and associates of the enterprise would reap high commissions (as much as 75-125% of the initial annual premium paid by the policyholder) for each HPI policy sold.”

Plaintiffs accuse Penn Mutual of ignoring its own underwriting guidelines “by repeatedly accepting insurance applications for plaintiffs that … falsely inflated the net worth of plaintiffs.” The policies equated to big profits for the insurer because all of plaintiffs’ policies “were designed to (and in fact did) terminate long before the insureds’ life expectancies,” the lawsuit states.

One type of “sham tax avoidance strategy” incorporated premium financing life insurance loans to finance the policies, the lawsuit alleges.

“The HPI Enterprise Defendants took advantage of plaintiffs’ lack of sophistication and convinced them that such policies were affordable due to the tax deductions they would generate—in essence promising them that the HPI policies would pay for themselves,” the lawsuit says.

Using life insurance in a premium financing strategy to manage tax obligations remains a controversial tactic within the industry.

Let policies lapse

Plaintiffs say they received none of the promised tax benefits, and lost “significant sums” through premiums, interest, and fees they paid to the defendants. The HPI enterprise dates to “at least March of 2016,” the lawsuit says, “and is continuing, because it is an ongoing business practice of the HPI Enterprise Defendants.”

“Ultimately, plaintiffs typically lost the HPI policies themselves (into which they had contributed significant funds) when they could no longer afford to pay the premiums,” the lawsuit claims.

Founded in 1847, Penn Mutual boasts an A+ Superior financial rating from AM Best.

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In yet another sign that insurers are facing increased scrutiny over the safeguarding of policyholder information, the New York Attorney General has accused Allstate Insurance Company and its affiliates of failure to build proper data security protection and notify its customers of serious data breaches.

The 60-page complaint filed Monday by AG Letitia James says Allstate-owned company National General Holding Company built a policy quotation website that was so porous and unsecured it allowed internet hackers in two separate attacks to easily obtain drivers’ license numbers (DLNs) and other personal information of hundreds of thousands of consumers. Moreover, according to the complaint, National General delayed for months notifying customers and regulators of the breaches, as required by law.

Company ‘made it easy for bad actors’

“The incidents at National General were remarkable in scale because the company made it
easy for bad actors,” says the complaint. “The first attack was on a pair of consumer-facing websites that allowed users to obtain auto insurance policy quotes, which National General had intentionally designed to expose consumers’ private information with little prompting. Attackers discovered these weaknesses and used computer programs known as “bots” to harvest consumers’ DLNs from the websites with significant speed.”

The attacks went undetected for more than two months, until November of 2020, by which time information of nearly 12,000 consumers were exposed. Even after that problem was fixed, the AG complaint says, the insurer was victimized by a second larger attack on its agents quoting tool that compromised an additional 187,000 consumers.

“While the specific source of the breaches was National General’s design and release of
several insecure websites, the broader cause of the incidents was National General’s
prioritization of profit over the implementation of reasonable data security safeguards,” the New York State complaint says.

Although the data attacks occurred before Allstate acquired National General (formerly GMAC Insurance Group) in 2021 for $4 billion, the company’s data security still fell below the standard required by New York state law, the complaint says.

Allstate says problems remediated

For its part, Allstate says this is old news and the problems were long ago remediated.

“We resolved this issue years ago, promptly securing our systems after finding vulnerabilities in online quoting tools that could have exposed driver’s license numbers,” Allstate said in a statement. “We promptly notified regulators, contacted potentially affected consumers, and offered free credit monitoring as a precaution.”

The original problem was due to the poor design of its policy quotation web tools, which were intended to provide consumers with a fast quote for auto insurance. But, according to the complaint, National General intentionally built the tools to automatically populate the DLNs of not just the person entering their name and address, but of all drivers identified as living at that consumer’s address.

“DLNs are valuable to bad actors because they can be used for many forms of fraud,
including identity theft and government benefits fraud,” the AG said. “Indeed, according to the New York State Department of Financial Services (DFS”), the attacks on National General’s websites appeared to have been part of a ‘systemic and aggressive campaign . . . to steal nonpublic information.’”

The suit against Allstate, which asks for injunctive relief and civil penalties of up to $5,000 for each individual violation, follows by days action by the DFS against three dozen auto insurers for misappropriating driver policy information, fining them a total of $20 million for failing to timely report new and terminated policies.

N.Y. case may set precedent for data breach cases

Some attorneys and analysts contend the New York cases might set precedents in how data breaches are dealt with legally and the level of responsibility corporations have in safeguarding private consumer information.

“I expect that car insurers and other third parties in their broader orbit are going to be in for a lot of scrutiny in the years ahead because of their data collection and sharing practices,” said Peter Jackson an attorney in the intellectual property group at the firm of Greenberg Glusker. “There’s an increased focus and scrutiny on insurers and the role that they play in data sharing and transfer because they want as much data as they can get to be able to set rates. And much of the information that they want is often protected by consumer privacy laws.”

Jackson points out that in many cases it’s not the insurer itself collecting the data but third party companies or even electronic devices attached to the policyholders’ automobile.

“And there are data clearinghouses that are kind of in between,” he said. “LexisNexis has an arm that is basically directed towards amassing all of this data and then licensing it out.”

Indeed, in the Allstate case, the name and address provided by the user would be automatically populated on a Driver Details” page within the consumer quoting tool using a process referred to as “prefill.” With prefill, the consumer quoting tool then queried National General’s third-party data provider, LexisNexis Risk Solutions, for driver and vehicle information associated with the entered name and address. The tool then automatically displayed the results it received from Lexis, including the name of the consumer whose information had been entered by the user, the entire DLN of that consumer, the names of any other drivers identified as potentially living at that consumer’s address, and the entire DLNs of those other drivers.

“National General designed the consumer quoting tool so that all of this information would appear in plain text—i.e., fully exposed—to the user of the tool,” reads the complaint. “In effect, if a user of the consumer quoting tool entered a consumer’s name and address, the tool would automatically populate the quoting screens with the fully visible names and DLNs of all drivers identified as living at the consumer’s address without any sort of authentication that the user was entitled to view the information.”

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A Utah judge paused an emergency order banning Sentinel Security Life Insurance Co. from writing new business nationwide.

Judge Donald H. Hansen paused the order after a South Carolina judge reversed a similar order last month against Atlantic Coast Life Insurance Co. Both insurers are owned by Advantage Capital Partners, known as A-Cap.

Under Hansen’s directive, the prohibition on new policy business is stayed pending the outcome of a trial set to start May 12. That appeal by A-Cap had been scheduled for March 10, but was rescheduled.

“All prohibitions contained in the Emergency Order, including the prohibition on the Companies’ ability to write new business … are hereby held in abeyance, shall not be enforced while this stay remains in effect and no other directives or orders shall be issued that undermine this Order, until resolution of this case,” Hansen wrote.

Sentinel Security stopped writing new policies while the A-Cap appeal was pending. With the stay granted, Sentinel Security is back in business. An A-Cap spokesman sent InsuranceNewsNet the following statement:

“While there have been sales in both states—with South Carolina operations never having been interrupted—we are planning to launch a targeted roll-out initiative in the near term. We’re grateful for the continued support of our distribution partners who have remained enthusiastic about working with us throughout this process. A-CAP remains committed to full transparency with regulators as we cooperate to address all outstanding matters.

A hearing on the Utah Emergency Order is scheduled for May 12, and we anticipate resolution on the valuation matters at that time, if not before. We stand firmly behind our valuations, which have been substantiated by highly regarded, independent valuation experts, and we remain confident in the financial strength of our company.”

Joint effort

South Carolina and Utah regulators shared information as they probed the financials of both A-Cap insurers throughout 2024, court documents say.

In South Carolina, Michael Wise, director of the South Carolina Department of Insurance, issued an April 10, 2024 “confidential order” placing Atlantic Coast and Southern Atlantic Re into “confidential administrative supervision,” court documents say.

On Oct. 21, a directive informed the insurance companies that South Carolina was “unwilling to continue to permit the insurers to incur new liabilities …  when all companies[’] RBC are at a mandatory control level and each of the insurers exhibits negative surplus.”

South Carolina regulators directed Atlantic Coast to cease writing new business on Nov. 14, court documents say. Utah made its directive official on Dec. 2 and South Carolina followed on Dec. 11.

Things changed on Feb. 13 when South Carolina Administrative Law Judge Ralph King Anderson III sided with A-Cap.

Anderson rebuked regulators and rejected the SC insurance department’s conclusion that Atlantic Coast is in financial distress.

“The evidence shows that ACL maintains a positive cash flow and has not experienced any difficulty paying amounts owed to either its policyholders or creditors,” he wrote.

In a scathing 24-page decision, Anderson criticized the department’s process for moving ahead with its directive despite Atlantic Coast’s good faith efforts. The judge wrote that the results financially damaged the insurance companies.

The directive “has tarnished Petitioners’ credibility in the market, resulting in a loss of employees, and damaged relations with its brokerage distribution and amongst local funeral homes,” Anderson wrote. “Moreover, policyholders have sought recoupment of premiums, resulting in financial loss to the public.”

South Carolina regulators have not decided on a response to Anderson’s decision, a spokeswoman said this week.

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The insurance industry, already girding for the impact President Trump’s tariffs will bring to its business, is facing even broader repercussions from the administration’s policies well beyond what tariffs could bear.

Auto, home, health, and life insurance are all likely to be affected by the shifting policies, raising prices for consumers and eating into profits for the companies.

“The president’s every action, from tariff threats to targeting immigrant workers, is setting off actuarial alarm bells,” says Rep. Jake Auchincloss, (D-Mass.).

Writing in an opinion column for MSNBC.com, Auchincloss warned that tariffs will bring costly surges to auto insurance but the administration’s use of the legal system and expansion of the roles and responsibilities of the uninsured will raise costs across the board.

Because homes and cars are “bundles of lumber, steel, aluminum, and semiconductors,” the president’s plans to tax all those materials at double-digit rates will spur inflation that will course through repair or replace costs for autos.

“Notably quite the opposite of Trump’s campaign promise to cut auto insurance premiums in half,” Auchincloss said.

Home insurance may be hit by tariffs

But it won’t stop with autos. Home insurance may be even more sensitive to the president’s agenda, said Auchincloss, who was an executive at Liberty Mutual where he led product development before running for Congress. Because nearly 15% of the total U.S. imports are in construction-related goods (Canada alone accounts for 50% of wood imports) the material costs of home construction and repairs will surge along with labor costs.

“The construction industry has the highest percentage of undocumented workers of any sector,” the Congressman said. “Whether through deportation or fear, its labor force participation is likely to decline. That will spike homebuilding costs everywhere.”

Health insurance costs might spike, as well.

“Trump and congressional Republicans appear intent on axing Medicaid, which insures children, the poor and the elderly,” Auchincloss said. “The uninsured still get sick, though. Lacking access to preventive care, they may get sicker faster. When they do, they go to emergency rooms, where hospitals foot the bill.”

Market downturn likely to impact earnings

The insurance companies won’t get a pass, he said. Since most insurers make the bulk of their profits through investing, the turndown in the markets is likely to impact earnings.

“Those returns are a function of interest rates and asset management, not underwriting,” Auchincloss said.

The industry got some fairly good news with the Consumer Price Index February numbers out this week. But analysts said there’s less optimistic information in the fine print.

“While we may have seen a slower rate of inflation in February, price pressures have the potential to remain sticky from here,” said David Seider, chief commercial Officer at The Zebra, an online insurance comparison service. “Today’s report shows auto insurance rates up 11.1% annually and are expected to rise further when considering tariffs impacting the auto industry.”

Seider said some car dealerships have already begun “front-running” tariffs and preemptively raising prices.

“If the price of materials, and new and used vehicles continues to rise, so will the price of auto insurance,” he said.

As for insurance carriers, he said, some of the leading brands are in a much healthier position than they were a few years ago.

“Years of increasing rates has brought stability and profitability back to their books,” he said. “So, some of them may be able to ‘wait and see’ when tariffs go into place and won’t be forced to preemptively increase rates. All that being said, if tariffs are here to stay, they will adjust their pricing to match.”

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Empower CEO Edmund Murphy III isn’t ready to sound any alarms over the tumbling stock market, which fell about 3,000 points in one month.

The market self-corrects about every two years on average, Murphy said, a trend that dates to the early-1960s.

“It’s going to happen, and there’s lots of different triggers, but I think for the most part, what we’re seeing among our 19 million investors as they’re staying in the course,” Murphy said, later adding: “I think the volatility is here to stay for a bit.”

Murphy spoke to CNBC news producer Stephanie Dhue during the Retirement Symposium: The Forces Transforming Retirement, hosted Tuesday by Milken and the Employee Benefit Research Institute.

Empower is the second-largest retirement services provider in the United States by total participants, and administers $1.7 trillion in assets via retirement plans, advice, wealth management, and investments.

Dhue read several news headlines to Murphy, who reacted candidly with opinions and expectations:

Chances for a SECURE 3.0. Murphy is not optimistic that a SECURE 3.0 bill is in the near future given the priorities expressed by Congress. However, the “tax incentives” associated with saving for retirement are likely to remain unchanged, he said, downplaying the “retirement crisis.”

“I’m not in the camp that the sky is falling,” Murphy said. “I think the system is very, very strong.”

Many of the provisions of the SECURE Act of 2019 and its successor, SECURE 2.0, passed in 2023, are taking effect on staggered timelines and are removing the barriers to annuity sales in retirement plans.

The “saver’s match” is next up. Starting in 2027, low- and moderate-income retirement savers can receive saver’s match contributions from the federal government on their first $2,000 in contributions to a defined contribution plan or individual retirement account.

What should be in SECURE 3.0? Murphy wants to see coverage requirement as part of the next SECURE legislation. Seventeen states have some form of state-mandated retirement savings program in place, including some form of auto-enrollment.

“The balances are small,” Murphy said. “The average is $2,000 but it is spawning. For the companies that will survive, it is spawning and will spawn more 401(k)s. The challenge in that space is 50% of small businesses fail in five years.”

Private equity in retirement plans. Private equity options will “absolutely” come to retirement plans eventually, Murphy said.

Private equity firms are aggressively lobbying to be an option within Americans’ tax-deferred defined contribution plans. With Republicans in control of all levers of government the chances of that happening are better than ever.

“Private equity has existed in defined benefit plans for 35 years,” Murphy said. “So, it’s good enough for the corporations to put in their own pensions, but it’s not good enough for the 128 million Americans to have access to the best performing asset classes in the last 30 years?”

Litigation reform is needed before private equity can be an option, he added.

Critics, especially consumer advocates, say fees are higher and private equity options are difficult for everyday Americans to fully understand. The Employee Retirement Income Security Act of 1974 blocks private equity from gaining access to 401(k)s.

“There are ways to do it that are very straight, very safe, and straightforward,” Murphy said. “And I’m going to tell you it’s going to happen.”

Artificial intelligence. Empower is “all in” on AI helping the company achieve a goal of a 25% increase in productivity, Murphy said.

That means using AI for things like analyzing some of the eight million calls Empower receives to determine what went right and what went wrong. While some employees might need a skills reset, Murphy said he is not seeing the “anxiety on the employee side.”

With more technology comes the potential for hackers and data invasion. It’s the one threat that Murphy conceded “keeps me up at night.”

“Part of the way we’re leveraging AI is both defensively and offensively against the bad actors,” he explained. “They pervade the market, and they’re really smart, so you’ve got to say one step ahead.”

Trump and DOGE. Murphy chose his words carefully in response to a question about Elon Musk and his Department of Government Efficiency. DOGE is downsizing the federal government via thousands of mass firings and early retirements in what some critics are calling “deregulation by layoff,” as Dhue noted.

“I think there’s a belief that many share, that the federal government has become increasingly too large,” Murphy said. The question becomes “how much glass do you break” before essential government operations become negatively affected.

“It’s clear that this is the path that they’re going down,” he added. “I think that’s part of why you see the financial markets reacting the way they are, because there is a lot of uncertainty. Hopefully, it’s done with some level of discipline and precision.”

Murphy noted that many analysts assumed Trump’s return to the White House would mean deregulation and a merger-and-acquisition boom. It hasn’t happened.

“January was the worst January for M&A in the last 12 years,” he said. “So, you’ve seen a decided slowdown in that regard. Obviously, rates have stayed higher, so the cost of capital is higher. It’s going to be interesting to see how that plays out.”

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Profitability will be the biggest top-of-mind issue for insurers in 2025, while advanced data and analytic technologies will be insurers’ top strategic priority this year.

Majesco polled insurers on their strategies and investments for 2025 and presented the results of that study in a recent webinar.

“We must rethink the business operating model that we’ve had for decades and create a new modern era of insurance,” said Denise Garth, Majesco chief strategy officer. “The way business is done needs to leverage the technology, needs to understand a different set of customer expectations, needs to understand a different level of talent that we must bring into our organization, and leverage that technology so it enables them to do things more quickly and provide it in a quality manner.”

Insurers’ optimism index is trending upward, she said. An increasing percentage of insurers reported they plan to introduce new products, develop new business models and focus on innovation.

Carriers are increasing their spending and reallocating resources to remain competitive at a higher rate than they have over the past four years, said Glenn Westlake, Majesco vice president of strategic marketing. For example, 69% of insurers surveyed said they expect to increase their information technology budgets for 2025.

Insurers eye new products

Insurers also reported they plan to develop new products and new business models for existing markets as well as new markets in 2025, he said.

Enhancing existing “traditional” insurance products and developing new ones are the top two areas insurers said they are working on this year. But companies are looking at developing more worksite and individual products, Westlake noted.

Insurers’ product focus for 2025 reflects heightened awareness of new risks, shifting market conditions and customer needs to close protection gaps, he said.

Digital solutions are focus in 2025

Digital payments is another area of insurer focus in 2025. Westlake said. More insurers are accepting payments through their own app or digital wallets.

Artificial intelligence is becoming more accepted by insurance carriers, the study showed, but consumers have been slow to use these tools. Westlake said only 20% of consumers with basic AI experience said they have used AI with their insurer. But those consumers who have used AI were happy with it, with 88% of Generation Z and millennials and 67% of Generation X and baby boomers saying they were satisfied with the AI experience.

Garth said insurers must develop an action plan to invest in the future instead of putting resources into systems that no longer work. That action plan includes answering the following questions:

• Assess how your strategies and priorities compare to others in the industry. Are you a leader, a follower or a laggard?
• Does your technology and operating model provide a foundation to adapt, innovate and deliver at speed as markets shift, risk changes and the pace of change continues?
• Are your investments defensive or offensive in nature?
• Are you making investments to survive or to achieve growth and scalability?
• What do you need to adjust?
• Can you keep up with the pace of change?

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Creating a new asset class could help more Americans access the in-plan guaranteed lifetime income options studies show are needed to help avert a mass retirement crisis.

Cheryl Evans, director of the Lifetime Financial Security program at the Milken Institute, endorsed the idea during the Retirement Symposium: The Forces Transforming Retirement, hosted Tuesday by Milken and the Employee Benefit Research Institute.

Asset classes evolve when products share similar characteristics, performance, liquidity and risk profiles, Evans noted, and fall under the same laws and regulations. Different asset classes perform different roles in a diverse investment portfolio.

“We feel like these products fall into that category” of deserving their own asset class, Evans said. “We’re hoping for movement towards discussing and clarifying and regulating this as a separate investment product.”

Evans gave a brief presentation of a new Milken research paper on moving forward with “in-plan lifetime income.” Forty-seven percent of working households are in danger of not having enough retirement savings, according to analysis from the Center for Retirement Research at Boston College.

A growing trend

Thanks to legislation like the SECURE Act and SECURE 2.0 Act, which include provisions encouraging the adoption of annuities in retirement plans, annuity offerings are picking up steam. Creative offerings like LifePath Paycheck are bringing together firms like BlackRock with insurers like Equitable Financial and Brighthouse Financial to offer “guaranteed income” via a target date fund.

When a participant enters retirement, they will receive a guaranteed amount of funds in a paycheck-like manner that is meant to provide a stable source of income. By providing access to guaranteed income through a target date fund, LifePath Paycheck is meant to be more stable than a standard 401(k).

“Retirement is a universal concern,” Evans said. “It affects all people of all ages, and just saving for the future. I still don’t fully believe that in maybe 20 years, many people are going to retire in the traditional sense.”

Surveys show that people are warming up to annuities, however. A consumer focus group run by Hearts & Wallets found increased interest for in-plan retirement income annuities.

There remain educational efforts that could further understanding and acceptance of lifetime income solutions, Evans said, such as educational materials that explain things like the fees involved, and sets of Frequently Asked Questions to head off objections.

“We believe that education efforts that reach out to workplace-sponsored retirement plan decision-makers would be impactful, coupled with educational outreach to plan participants,” Evans explained. “Building an awareness and understanding of the solutions among the decision-makers, we think would be important.”

Fear of lawsuits

Among plan sponsors there exists a specific fear of offering new lifetime income options in plans, Evans noted.

“Based on the information we’ve gathered, it seems clear to us that a substantial number of plan sponsors have been reluctant to offer these products due to concerns over triggering fiduciary breach lawsuits,” she said.

Many such lawsuits are making their way through courts across the country, some filed against firms handling pension risk transfer deals. For example, In a Massachusetts lawsuit, nearly 100,000 AT&T retirees say plan administrators had a fiduciary duty to select “the safest annuity.”

PRT deals have become big business in recent years, as companies look to offload hefty pension commitments. Meanwhile, insurers and private equity firms seek the chance to invest and reap fees from large pots of pension funds.

Plan sponsors rely on a safe harbor to rely on representations from annuity providers about their financial strength. This provision is part of the SECURE Act. But tighter, more specific language is needed, Evans said, to give plan sponsors more confidence in offering annuity options.

“We feel like it’s not detailed enough,” she said of the safe harbor language. “It’s not giving people enough security to fully get into the product.”

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A consumer advocacy group is asserting that the National Association of Insurance Commissioners (NAIC) enjoys widespread power and influence without the accompanying transparency and accountability.

Building upon a previous report, the American Consumer Institute released an updated paper last week analyzing the NAIC’s tax status, lobbying activities, influences, operations and spending habits.

The problem, as the ACI sees it, is that the NAIC enjoys nonprofit status and doesn’t pay taxes, while also being exempted from standard transparency and disclosures required of government agencies.

“The issue right now is, you have this organization, the NAIC, that isn’t subject to any of those rules, but it seems to be exercising a lot of those powers and authority,” said Tirzah Duren, president of the ACI.

An NAIC was not contacted about the ACI paper “and had no role in the research or content of this document,” an NAIC statement said. The NAIC is governed by the chief insurance regulators of the 50 states, the District of Columbia, and the five U.S. territories.

“The function of the NAIC’s professional staff is to support state insurance departments and their nearly 11,000 employees across the country in their mission to ensure fair and stable insurance markets and to protect and educate consumers,” the statement said.

In order to bring greater accountability to the agency, the ACI paper offers the following recommendations:

• Require the NAIC to file an annual Form 990 with the IRS like other nonprofits. “This would provide the public with detailed information about the NAIC’s operations, revenue sources, and financial condition,” the ACI said.
• Subject the NAIC to the same transparency requirements as government agencies if claiming a quasi-governmental status. These must include the Administrative Procedure Act and Freedom of Information Act, the ACI said.
• Independent third-party audit. A comprehensive audit to review the NAIC’s operations, “particularly the potential conflicts of interest” in its revenue-generating activities. The audit should also examine governance practices and provide recommendations for ensuring that state governments retain the ability to override NAIC policies, the ACI said.

Long history of regulation

The NAIC was founded in 1871 as a voluntary organization of state insurance regulators. Its primary mission is to establish standards and best practices for insurance regulation, coordinate regulatory oversight across states, and ensure consumer protection.

The organization has survived several threats to its perch as the main regulator of insurance.

In 1945, Congress passed the McCarran–Ferguson Act after the Supreme Court ruled in United States v. South-Eastern Underwriters Association that the federal government could regulate insurance companies under the authority of the Commerce Clause. McCarran-Ferguson exempts the business of insurance from most federal regulations.

More recently, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 established the Federal Insurance Office. However, it gained little traction in U.S. insurance regulation in the years since and is rumored to be in the sights of the Trump administration downsizers.

The ACI first published its analysis of the NAIC in 2009, Duren said, and kept a watch on the organization in the years since. In recent decades, the NAIC expanded its role in the insurance industry by adding accreditation programs and expanding financial reporting and solvency regulations. Today’s challenges include cybersecurity, climate risks and others, with the NAIC heavily involved.

“The public is left in the dark regarding whether the NAIC is blurring the line between offering helpful guidance or influencing regulation,” the paper explains. “Furthermore, in many cases, state governments treat the NAIC as a quasi-governmental organization, entitled to certain privileges not enjoyed by other nonprofits.”

Lobbying role questioned

The ACI paper questions the lobbying activities of the NAIC. In addition to publicly pushing states to adopt its model laws, the NAIC occasionally takes public stances on insurance issues.

Like it did in 2023 when the Department of Labor released its latest attempt to extend fiduciary duty to the sale of insurance products.

“We fundamentally disagree with the White House’s characterization of state consumer protections for annuity products,” the statement read. “The White House press statement that oversight of these products ‘varies state by state’ and provides ‘inadequate protections and misaligned incentives’ suggests either ignorance of, or willful disregard for, the hard work of the 43 states and counting that have worked diligently to enhance protections for consumers by adopting the NAIC’s Suitability in Annuity Transactions Model Regulation.”

Whether these count as lobbying activities or not is moot since the NAIC doesn’t have to file reports, the ACI noted.

“While overt lobbying for 501(c)3’s is strictly limited by IRS rules and regulations, what little that can occur must be reported,” the paper said. “However, the NAIC does not file such information because a 1955 court ruling found the NAIC is a ‘wholly owned instrumentality’ of the states, meaning it is not subject to such disclosures.”

The ACI also found substantial gains in some of the NAIC revenue-generating activities. The largest source of NAIC’s revenue comes from database fees, which totaled $42.3 million or 27% of the organization’s total 2024 revenue. Insurance companies pay fees to file with the NAIC’s Financial Data Repository.

The NAIC also collects revenue through transaction filing fees. The most notable is the System for Electronic Rate and Form Filing (SERFF), which allows insurance companies to file rate and form changes. Fifty-three U.S. jurisdictions accept filings with SERFF and 35 states require them in at least one business area, ACI said.

As product development and competition increased through the years, so have the number of SERFF transactions. In 2001, there were 3,694 SERFF filing transactions. However, by 2023, that figure grew to 517,571. Meanwhile, the filing fee increased from $7 in 2001 to $19.58 in 2025, ACI noted.

Twenty-three states mandate filing through SERFF, Duren pointed out.

“That’s where you see a lot of these problems about accountability coming into play,” she said. “You have this organization that’s supposed to be a nonprofit, and yet the government is, in a lot of ways, mandating that businesses are required to use this service.”

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Equitable Financial and Allianz Life parlayed a strong 2024 into a top-five finish in the LIMRA annual annuity sales rankings.

For the first time ever, total quarterly annuity sales surpassed $100 billion in all four quarters of the year. Total annuity sales finished at $432.6 billion, up 12% yearly, according to LIMRA’s U.S. Individual Annuity Sales Survey, representing 83% of the U.S. annuity market. This is the third year of record-high annuity sales, which together represent $1.1 trillion.

Experts expect another strong year in 2025.

Athene Annuity & Life again topped the sales charts with $36 billion in sales. But those sales were basically flat year-over-year. Meanwhile, the rest of the top five made strong gains. Equitable and Allianz both improved sales by 20% to 25%, propelling them past New York Life.

In the fourth quarter, U.S. annuity sales totaled $100.6 billion, down 13% from the record-setting results in the fourth quarter of 2023. Falling interest rates dampened fixed-rate deferred (FRD) and income annuity sales, pulling down overall results.

“This was a remarkable year for the U.S. annuity market with nearly 80% of participating carriers reporting positive growth. Favorable economic conditions and growing investor awareness about the protections and guarantees that annuities offer propelled the broad growth,” said Bryan Hodgens, senior vice president and head of LIMRA research. “The past few years have transformed the annuity market. Although we don’t expect sales at the levels seen the past two years, LIMRA predicts total annuity sales to be well above $350 billion in 2025 and remain above $300 billion through 2027.”

LIMRA provided a further breakdown by product category:

Registered index-linked annuities

Registered index-linked annuity (RILA) sales jumped 35% to $17.5 billion in the fourth quarter. RILA sales reached $65.4 billion in 2024, 38% higher than the prior year. This is the 10th consecutive record-setting year for RILA sales and the first year RILA sales outperformed traditional variable annuity sales.

“Driven by greater competition and continuous product innovation, RILA sales have exploded over the past decade — from $3.7 billion in 2015 to $65.4 billion in 2024,” said Hodgens. “Given the current market uncertainty, RILA products have carved out a nice place along the product risk spectrum, positioned between traditional variable annuities and fixed index annuities. LIMRA is forecasting sales to remain at or slightly above the sales in 2024.”

Traditional variable annuities

In 2024, traditional variable annuity (VA) sales experienced growth for the first time in three years. Fourth quarter traditional VA sales grew 35% year-over-year to $16.6 billion and total 2024 sales jumped 18% to $60.8 billion.

Fixed indexed annuities

FIA sales were $31.8 billion in the fourth quarter of 2024. While 10% below the record-high sales in the third quarter, it was 28% above the prior year’s results. In 2024, FIA sales grew 32% to $126.8 billion. Three-quarters of the top 20 FIA carriers reported at least double-digit growth.

This is the third consecutive year of record FIA sales. Although lower interest rates will likely diminish demand for FIA products in 2025, LIMRA is forecasting FIA sales to remain above $100 billion in 2025.

Fixed-rate deferred

For the fourth consecutive quarter, FRD annuity sales fell year over year. Total FRD sales were $28.3 billion in the fourth quarter, down 52% from the record set in the fourth quarter of 2023. For the year, FRD sales fell 8% to $152.3 billion.

“The fourth quarter marked the lowest FRD sales in 10 quarters. Despite expected additional interest rate cuts, LIMRA expects FRD annuity sales to remain above $120 billion in 2025, which is double the sales recorded before 2022,” noted Hodgens.

Income annuities

After eight consecutive quarters, single premium immediate annuity (SPIA) sales fell below $3 billion. SPIA sales were $2.9 billion in the fourth quarter, down 18% from the prior year’s results. For the year, SPIA sales rose 1% to $13.4 billion, setting a new annual sales record.

Deferred income annuity (DIA) sales fell 22% year over year to $1 billion in the fourth quarter of 2024. For the year, DIA sales increased 16% to $4.8 billion, a record for this product line.

More data can be found at LIMRA’s Fact Tank.

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In an environment where technology and AI have begun proliferating even traditional insurance practices, insurtechs must find other ways to differentiate themselves and adapt, Melbourne O’Banion, CEO and co-founder, Bestow Inc., said.

Bestow is one of the more recognizable names in the American insurance landscape, with CNBC naming it as one of the world’s leading insurtech companies of 2024.

“Well, I would say that if an insurtech’s business model is completely dependent on an AI tool or software that a competitor can easily pick up and utilize, then the insurtech probably doesn’t have a highly durable and sustainable business model. I think that is a risk, depending on the insurtech’s business model, that they have to consider,” O’Banion said in an interview with InsuranceNewsNet.

He suggested insurtechs find innovative ways to pivot their core business model to keep up with the rapid pace of advancement, such as creating specialized solutions and augmenting the technological advancements they have already been leveraging up until this point.

“Because AI has entered into the picture, it almost now overemphasizes the need for a company to bring something to market that is differentiated and that allows for them to do something unique wherever they’re competing in. And then AI, I think, is just going to magnify whatever that is,” O’Banion said.

What AI’s proliferation means for insurtechs

O’Banion acknowledged that technology becoming more widespread across the insurance industry raises questions about where that leaves insurtech, which was already undergoing a shift in its “second wave.”

“When the wave of insurtech investments started happening, AI really wasn’t much of anything that people were discussing. In an era of AI and with a lot of the advancements and tools that are coming about, where does insurtech stand?” he said.

It could be a good time for insurtechs to rethink their core business model, ensuring it is sustainable and can withstand the rapid pace of technological advancement in today’s age.

“The speed and pace of change and transformation, just in the broader software and technology industry, is accelerating at a pace that I think is very hard for everybody to keep up with AI. So, I think you have to have a core business model, as an insurtech, that you can defend and that you’re building something sustainable over the long term,” O’Banion said.

Use AI to build on strengths

It may be advantageous for insurtechs to pivot their strategy and capture AI as a tool to augment their business model rather than necessarily thwart or highly disrupt it, O’Banion suggested.

“I think what insurtechs need to do, and what we did at Bestow is we built and proved out our solution and platform and ultimately decided how to best monetize it. Our view was enabling our carrier clients to leverage all that we had built was a much better way for us to monetize the platform and enable them to get all the benefits from it, and partner with them rather than necessarily compete with them,” he said.

Illustrating his point, he noted that Bestow began as an early adopter of AI for the consumer side. Now, it has sold its life insurance subsidiary and focuses more on deploying its proven solutions, software and platform to carriers.

“I don’t think it’s really replacing a business model or in any way saying that the insurtech was doing one thing and now it has to do something else. It’s how are you leveraging AI to further your mission and advance the ball down the field of what you’re already trying to pursue and achieve,” O’Banion said.

Specialize and customize

Specialization and customization are emerging trends among insurance companies now seeking to differentiate themselves, O’Banion noted. He said insurtechs can leverage this, starting with a problem and then building out specific solutions to that.

“I think the insurance industry is heading into an increased era of specialization,” he said. “The advice to give to insurance companies looking to adopt AI or even insurtechs is to start with a problem; there’s a very broad canvas with which companies can utilize AI.”

For instance, O’Banion said Bestow’s strategy has been to identify a specific problem and then determine what investments will be put into helping solve it while adopting AI and partnering with aligned carriers.

Augment, not compete

O’Banion noted that the insurtech industry’s flexibility can help it stay ahead of the rapid pace of AI development, urging a focus on augmenting what is already being done with utility and usage of AI tools.

“In a regulated industry like insurance, you have to navigate the complexity of utilizing AI tools in a regulatory space. We like to think of it as not replacement, but augmentation… Whether it’s developing software, leveraging AI tools and solutions to develop better software or developing AI solutions that your partners can leverage and utilize, which is what we’re doing (Bestow),” he said.

Founded in 2016, Bestow started out as a digital life insurance company. It has recently evolved to focus on providing digital solutions to American insurers. Bestow is headquartered in Dallas, Texas.

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