Needham, Mass.–A new research report from TowerGroup Inc. says insurers should go above and beyond current regulatory requirements when dealing with the issue of annuity suitability.
The report by Senior Analyst Rachel Alt-Simmons says the widespread adoption of the “model law,” which holds insurance companies–not just the selling agents or broker-dealers–accountable for ensuring the appropriateness of their annuity products, presents new liabilities and challenges for insurers. “The adoption of this regulation places insurance companies under extreme pressure to find ways to ensure the products they sell are suited to the investors,” the report says.
The largely paper-based nature of annuity processing systems, coupled with a lack of standardized industry processes, will make compliance difficult, the report says. “These paper-based processes make it difficult for insurers to screen applications in an automated fashion. That is because existing policy administration systems may not be able to support the business rules engines needed to weed out inappropriate transactions.”
The report suggests that insurers adopt a proactive approach to addressing suitability by leveraging business intelligence technologies. “The implementation of traditional business intelligence software solutions is essential to better understand and interpret the behavior of the broker, selling organization, and end consumer. The increased transparency of business processes provides opportunities to mitigate compliance risk.”
Source: TowerGroup Inc.
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