On the first Saturday in May, the surest bets at the Kentucky Derby are the hats will be extravagant and the mint juleps will be flowing.
On every other day in the Bluegrass State there will soon be an even surer bet, thanks to recent actions by the Department of Insurance.
Kentucky savers can now rest assured that financial professionals must act in the consumer’s best interest when offering recommendations about annuities.
The Kentucky Department of Insurance recently adopted a new regulation that incorporates the enhanced consumer protections in the National Association of Insurance Commissioners’ (NAIC) updated best interest model regulation on annuity transactions.
The regulation, which goes into effect in January, raises the standards financial professionals must meet while ensuring that individual Kentucky savers maintain access to, and information about, annuities, the only financial product in the marketplace that can provide guaranteed income for life. This is a huge win for Kentucky savers.
Now, more than one-third of the states have adopted similar rules or laws. Building on this momentum, several other states are considering similar measures to protect their citizens.
The actions in the states align closely with the Securities and Exchange Commission’s Regulation Best Interest, which took effect last year. And, unlike a fiduciary-only approach, these measures make sure savers, particularly financially vulnerable middle-income Americans, can access information about different choices for long-term security throughout retirement. According to a new study, a fiduciary-only approach would limit choices for consumers, reduce savings of nearly 3 million people by $140 billion and widen the racial wealth gap by 20%.
The U.S. Congress confirmed the importance of lifetime income when it passed legislation in 2019 that made it easier for employers to include annuities in workplace retirement plans. These protections safeguard consumers while also ensuring that middle- and working-class families retain access to annuities.
More states should follow Kentucky’s lead and implement this practical consumer protection. Then, more consumers looking to protect their family’s financial future would benefit from a best interest standard of care, no matter where they live.
(Brian Wilson, Immediate Past President of NAIFA-KY, is from Lexington, Kentucky.)
Jana Lee Pruitt was a Regional Vice President in the State Relations Department at the American Council of Life Insurers. She was responsible for state legislative and regulatory affairs in Alaska, Kentucky, Louisiana, Mississippi, Tennessee and West Virginia. She also led ACLI’s state advocacy teams on the issues of guaranty associations and insurance data security.
Brian Wilson, Immediate Past President of NAIFA-KY, is from Lexington, Kentucky.
