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NAIC Works on Consumer-Friendly Annuity Buyer’s Guide The National Association of Insurance Commissioners’ revised guide would be required at point of sale. By Linda Koco


n updated buyer’s guide for deferred annuities appears to be close to completion. Is this a case of someone reinventing the wheel or does the re-do have merit? Iowa’s First Deputy Commissioner Jim Mumford contends the new document will be a lot easier to read than the one currently in use, which was last updated over a decade ago. “The language is more tuned to the consumer,” he says, “and it’s a lot shorter than the current version. We wanted to make sure of that, so people will actually read it.” Mumford chairs a National Association of Insurance Commissioners (NAIC) working group that has been working on the revisions along with several industry groups and some consumer representatives. In recent weeks, the group has been reviewing final language before sending the document on through NAIC channels for formal adoption. The revised NAIC Buyer’s Guide for Deferred Annuities is definitely aimed at consumers, but it may prove of value to advisors, too.


For instance, if the final version of the revised guide really is simpler, shorter and more consumer-friendly than the previous version, that might come in handy when advisors are introducing annuity concepts to customers. (The word “if” appears here only because the final version is not yet approved.) Advisors who take an educational and consultative approach to their practice typically like to refer their customers to easy-to-read resources from authoritative bodies. They use the materials to reinforce points and serve as refreshers. 8

InsuranceNewsNet Magazine » March 2013

Also, the question list near the end of the revised document could make a difference. These are questions that consumers might want to discuss with their annuity salesperson. But advisors can use the questions, too – as a reminder of points to cover with the customer, and as a heads-up on topics that customers might bring up, particularly customers who have read the guide. In addition, the revised guide is one with which advisors will need to be familiar. That is because of a provision in the amended Annuity Disclosure Model Regulation that NAIC adopted just over a year ago. The amended model requires that, when annuity applications are taken in face-to-face meetings, the NAIC approved Annuity Buyer’s Guide must be delivered along with an annuity disclosure document. Delivery must occur at or before time of application. Iowa has already adopted this model, and several states are expected to do likewise this year. In addition, a number of states are using an earlier version of the disclosure model that has a similar delivery requirement. (In all, nearly 20 states have some form of disclosure regulation.) So, advisors who work in states that have such regulations will likely find themselves sliding the new buyer’s guide, once available, across the table to customers. They will need to know what’s in it. This could entail a lot of transactions because, with a few exceptions, the model applies to all group and individual annuity contracts and certificates.

Advisor Interests

The revised guide reflects the combined work of many hands, including some who are keenly aware of advisor-related concerns regarding consumer education and disclosure. State regulators – via the Annuity Disclosure (A) Working Group of NAIC’s Life Insurance and Annuities (A) Committee – are the ones who have been

“The language is more tuned to the consumer and it’s a lot shorter than the current version. We wanted to make sure people actually read it.” – Jim Mumford Iowa First Deputy Commissioner

shepherding the buyer’s guide project. But several industry groups have participated too, among them the National Association of Insurance and Financial Advisors (NAIFA), the National Association for Fixed Annuities (NAFA), the Insured Retirement Institute (IRI) and the American Council of Life Insurers (ACLI). During the commenting process, the American Academy of Actuaries and some insurers weighed in as well. Two funded consumer representatives – Brenda Cude (University of Georgia) and Karrol Kitt (University of Texas) – were also on the team. Their role was to help keep consumer comprehension issues on the front burner. Hence, the new version focuses on deferred annuity essentials, not minutia, says Mumford. The pages include callout boxes and bullet point lists, to highlight certain ideas and support readability. Advisors will be relieved to learn that the proposed guide does include technical annuity terms and concepts. However, it does so in short sentences and active voice – writing techniques that have been found to enhance comprehension. For example, in describing the two phases of an annuity, the most recent draft says: “All deferred annuities have an accumulation period and a payout period. During the accumulation period, your

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