SEC Proposes Streamlined Prospectus for Life Insurance Variable Annuities
November 1, 2018 by Frank Klimko
WASHINGTON – The U.S. Securities and Exchange Commission has proposed a new rule to allow life insurers to provide a streamlined prospectus for variable annuity and variable life insurance contracts rather than the longer prospectus that was difficult for investors to understand.
Under the rule, life insurers would be allowed to use a summary prospectus to provide disclosures to investors, which would include a reader‑friendly summary of key facts about the contract, the SEC said in a statement. More detailed information would be available electronically or delivered in paper format at no charge, the SEC said. Mutual funds have been permitted to use a similar layered approach since 2009, the SEC said.
Click HERE to read the original story via AM Best.
“Providing key summary information about variable annuities and variable life insurance contracts to investors is particularly important in light of the long‑term nature of these contracts and their potential complexity,” SEC Chairman Jay Clayton said in a statement.
The rule change would improve disclosure for investors, said Cathy Weatherford, Insured Retirement Institute president and chief executive officer.
“Consumers should receive useful information about the products that they buy, but the amount of currently required information in a typical prospectus is so complex and overwhelming that few consumers even read it,” she said in a statement. “That helps no one.”
Carl Wilkerson, vice president and chief counsel, securities, for the American Council of Life Insurers, agreed.
“ACLI commends the SEC for advancing improvements to variable annuity and variable life insurance disclosures,” he said in a statement. “Streamlined, simplified, plain-English disclosures will enable consumers to make even more informed decisions when considering a life insurance or annuity product to achieve financial and retirement security.”
Full statutory prospectuses for variable annuity products can range from 150 to 300 pages and contain language that most ordinary investors would find difficult to understand. As a result, full prospectuses are rarely used by most investors, the IRI said in a statement.
The rule will not become final until after the public comment period closes on Feb. 15.
In a separate rulemaking, the SEC is considering an overhaul of conflict-of-interest standards for brokers, dealers and investment advisers. The new rules would refurbish conflict-of-interest standards and supplant the U.S. Labor Department’s now vacated fiduciary rule. The SEC rule would have no impact on advisers who sell fixed indexed annuities or fixed annuities, two products over which the SEC has no jurisdiction (Best’s News Service, Aug. 7, 2018).
(By Frank Klimko, Washington correspondent, BestWeek: Frank.Klimko@ambest.com)
BN-NJ-10-31-2018 1448 ET #