House Committee approves bill to update annuity transaction law

Legislation seeking to ensure that the correct annuity products are best matched to the needs of annuity purchasers was approved this week by the House Insurance Committee.

Specifically, House Bill 2434, introduced by state Rep. Tony DeLuca (D-Allegheny), would update the suitability of annuity transactions of the Insurance Company Law and establish criteria to ensure consumers have been sufficiently informed about various policy features before the annuity is purchased. Such consumer protections can include surrender fees, investment advisory fees, and tax penalties.

“It is imperative to have strong standards in place to provide our residents with clear and appropriate sales, marketing and financial advice relating to the purchase and management of annuity contracts from insurers and insurance producers,” DeLuca, who serves as the Democratic chairman of the House Insurance Committee, said.

DeLuca stated that House Bill 2434 would also include the institution of insurer training requirements, which would also be established for producers who sell annuities. Additionally, the bill would prohibit an insurer from issuing an annuity recommendation to a consumer, unless a reasonable basis has been shown that the annuity is in the consumer’s best interest.

“A determination of suitability would be based on the consumer’s information, which includes the age, income, financial experience and objectives, liquidity needs, risk tolerance, tax status and other factors,” DeLuca said. “This protection is needed for all Pennsylvanians, and especially for our seniors.”

Pennsylvania’s Suitability of Annuity Transactions Law was passed in 2010. The National Association of Insurance Commissioners (NAIC), however, later passed an updated model bill to strengthen suitability requirements. Thirty-seven states and the District of Columbia have already passed the updated NAIC model bill.