Which of the following best describes the stated purpose of the NAIC Annuity Suitability Model Regulation? a. to promote annuity transactions that minimize consumer complaints to state insurance regulators b. to promote annuity transactions so that more consumers will purchase annuities c. to promote annuity transactions that reduce the amount of information the consumer needs to be given to make a purchasing decision d. to promote annuity transactions that appropriately address the consumer’s insurance needs and financial objectives
The correct answer and explanation is:
Correct Answer: d. to promote annuity transactions that appropriately address the consumer’s insurance needs and financial objectives
The stated purpose of the NAIC Annuity Suitability Model Regulation is to ensure that insurance producers and insurers act in the best interest of consumers when recommending annuity products. This regulation was developed by the National Association of Insurance Commissioners (NAIC) in response to concerns about inappropriate annuity sales, especially to vulnerable populations like seniors.
The regulation requires that any annuity recommendation made to a consumer must be suitable based on information obtained from the consumer, including their age, financial situation, insurance needs, and financial objectives. The intent is to align the annuity product being sold with what is most beneficial and suitable for the consumer’s personal circumstances. This is reflected in option d, which captures the core objective of the regulation.
The regulation also includes standards for recordkeeping, supervision, training requirements, and disclosure obligations. These provisions aim to enhance consumer protection by requiring that insurance professionals act with diligence, competence, and integrity.
Option a is incorrect because while reducing consumer complaints may be a side effect, it is not the regulation’s primary goal.
Option b is misleading since the regulation is not designed to increase sales but to ensure sales are appropriate and beneficial.
Option c is false because the regulation actually increases the level of information required to be disclosed to help consumers make informed decisions.
In summary, the NAIC Annuity Suitability Model Regulation is designed to promote annuity transactions that match the consumer’s specific insurance needs and financial goals, ensuring ethical practices and improved outcomes in the annuity market.