Product Drafting

DOL Fiduciary Rule Product Development Underway

An article by Greg Iacurci titled Insurance adjust to DOL rule with fee-based indexed annuities in the July 25, 2016 issue of InvestmentNews reports states that insurers are, “going full steam ahead developing fee-based fixed-indexed annuities due to greater anticipated demand from distributors for advisory products as a result of the Labor Department’s fiduciary rule.” The article specifically mentions the following carriers as having products under development:  Allianz Life Insurance Company of North America, Voya Financial Inc., Symetra Life Insurance Co., and Lincoln Financial Group. Midland National Life Insurance Co. launched its fee-based product before the final DOL rule was published.

For those of us involved in product drafting, review and filing, one important question is how significant will the product changes need to be to accommodate a fee-based compensation structure. Surrender charges are the obvious place to think there might be design changes. However, many products are filed with the surrender charges bracketed, so if the only difference at the contract level, is a reduction in surrender charge, there may not need to be any policy form filing. However, depending on how the actuarial material was presented in the filing, an informational filing may be required. Similarly, if there are changes to caps or other non-guaranteed elements the original filings may be sufficient to accommodate any change to product designs for fee-based distribution. 

While New York is not typically known as a state friendly to indexed annuities, at a recent compliance seminar offered jointly between LICONY and the NYSDFS, NY Life Bureau staff members indicated that they view the certified process as being a great fit for products being filed to make changes as a result of the DOL rule. 

In addition, DFS personnel offered the possibility that §4228, NY’s compensation law, provides a unique model of what constitutes reasonable compensation. 

Clearly, there is a lot to talk about and work through as we move toward implementation of the DOL Rule and as product development continues.