NAIC annuity guidance updates divide insurance and advisory groups

Insurance and financial planning groups are clashing over whether and how regulators should expand guidance tied to the National Association of Insurance Commissioners’ best-interest annuity sales rule.

In a pair of comment letters, industry trade groups defended the current framework while the Certified Financial Planner Board of Standards argues the model regulation falls short of true fiduciary standards.

The comment letters were collected by the NAIC’s Annuity Suitability Working Group, which is working “to promote greater uniformity” in compliance with the best interest annuity sales model revision adopted in February 2020.

In March 2024, Iowa Insurance Commissioner Doug Ommen first noted that reviews of compliance with the best interest model turned up “deficiencies” in producer monitoring.

Regulators went on to approve an Annuity Suitability Safe Harbor Guidance document late in 2025. The working group is now developing a “resource document to discuss various methodologies and practices insurers have implemented to effectively meet their supervisory obligation.”

Trades: The rule is working

In its joint letter, a group of seven leading life insurance and annuity trade groups stressed that the best interest regulation is working.

The 2020 regulation “is not only working as intended, but it is doing so in a way that allows insurers to tailor compliance programs to their particular business models while maintaining strong consumer protections,” the group wrote.

Insurers have invested heavily in training, technology, oversight systems and compliance procedures since the adoption of the rule, the letter stated.

The trade groups cautioned regulators against creating overly prescriptive guidance in a planned resource document, saying insurers already use layered supervisory systems that combine automated reviews, risk-based monitoring and human oversight to flag potential suitability concerns.

All 50 states have adopted some version of the NAIC best interest annuity sales rule, although the rules still vary to some degree.

Insurers have established procedures to monitor conflicts of interest, verify producer training and oversee third-party supervisory arrangements through audits, certifications and contractual requirements, the trade groups said.

They urged regulators to preserve flexibility and avoid duplicative requirements, particularly where firms already operate under other standards such as Regulation Best Interest.

The letter was signed by the American Council of Life Insurers, the Committee of Annuity Insurers, Finseca, the Indexed Annuity Leadership Council, the Insured Retirement Institute, the National Association for Fixed Annuities, and the National Association for Insurance and Financial Advisors.

‘Fundamentally flawed’

The CFP Board took a sharply different view, arguing the annuity model regulation is “fundamentally flawed” because it does not impose a fiduciary duty requiring producers to place consumers’ interests first.

The organization also criticized the rule for excluding cash and non-cash compensation from the definition of material conflicts of interest, despite commissions being a major incentive in annuity sales.

“CFP Board urges the NAIC to pause and begin anew by developing a new model regulation from the ground up that provides genuine consumer protections — a model regulation that incorporates well‑established fiduciary principles and considers compensation a material conflict of interest,” their letter reads.

The organization said any future rule should explicitly require advisers to act in consumers’ best interests and treat compensation incentives as material conflicts requiring disclosure and management.

A third letter

The working group received a third comment letter from the Michigan Department of Insurance and Financial Services. Regulators shared observations that many companies are not collecting all the necessary information. For example, with annuity replacements.

“In some instances, insufficient information is being collected to determine whether the new product in comparison to the existing product is in the best interest of the consumer,” the Michigan letter reads.

Companies need stronger oversight and, in some cases, producers “need further training,” the letter adds.

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