RJ and Makay

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Annuity products that provide guaranteed income benefits in innovative ways should be classified as hybrids, say a group of state regulators.  The recommendation is sure to catch the attention of producers, distributors and carriers.  One of the industry’s top sellers—the guaranteed life withdrawal benefit (GLWB), which is often sold with a variable annuity (VA), would come under additional regulatory scrutiny.

State insurance regulators voted yesterday to adopt amendments to an annuity disclosure model that would give customers a detailed breakdown of annuity product features.  The executive committee of the National Association of Insurance Commissioners (NAIC) voted unanimously to proceed with the amendments to the Annuity Disclosure Model Regulation, according to Jim Mumford, first deputy commissioner in Iowa’s insurance division.

The amended annuity disclosure model rule will require that clients receive a buyer’s guide when purchasing an annuity.  Carriers will be required to provide customers a disclosure form that describes the contract, its benefits and how the annuity works.  Customers will also receive an explanation of the impact of any riders, and information on the contract’s federal tax status and withdrawal penalties.

Forty of the largest U. S. life insurance companies may owe policy beneficiaries more than $1 billion, according to Florida Insurance Commissioner Kevin McCarty.  McCarty made the claim after participating in an evidentiary hearing last Thursday investigating how life insurance companies apply the Death Master File, a Social Security Administration list of deceased persons.

MetLife, the nation’s largest life insurer, has been using the Death Master File since the late 1980s to determine when to halt annuity payments to its clients.  Only since 2007 has it used the file to determine whether an insured customer had died so that his or her beneficiaries could receive payment, according to testimony at the hearing. And not until 2010 was it done in any systematic and comprehensive way.