Written By : Kim Borwick
Financially Reviewed By : Rubina K. Hossain, CFP®
This page features 8 Cited Research Articles
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The National Association of Insurance Commissioners (NAIC) is a member-supported regulatory agency created to monitor the insurance industry. The NAIC provides consumer protection and education to promote a competitive, transparent marketplace that offers reliable, available and affordable annuity products and other insurance services.

The dynamic landscape of the insurance industry requires a high level of regulation to monitor insurer solvency, promote consumer protection and facilitate consistency among states. Because the insurance industry, and therefore the annuity marketplace, is regulated by the states, the NAIC strives to provide a level of standardization through accreditation and model laws.

What Does the NAIC Do?

The National Association of Insurance Commissioners was established in 1871 to allow for the oversight of the insurance industry at the state level. The member-driven organization sets the standards in the insurance industry and supports state insurance commissioners.

NAIC Logo

The mission of the NAIC is to assist the state insurance regulators, individually and collectively, in serving the public interest and achieving the following fundamental insurance regulatory goals in a responsive, efficient and cost effective manner, consistent with the wishes of its members.

  • Protect the public interest;
  • Promote competitive markets;
  • Facilitate the fair and equitable treatment of insurance consumers;
  • Promote the reliability, solvency and financial solidity of insurance institutions; and
  • Support and improve state regulation of insurance.

The NAIC represents all 50 states, the District of Columbia and five U.S. territories and achieves its mission through peer reviews, analytics, market data and collaboration among task forces, working groups and state insurance commissioners.

State Ahead Strategic Plan

In 2018, the NAIC launched State Ahead, a blueprint for addressing the current state of the insurance sector. State Ahead was intended to update the existing regulatory framework and develop new policy and model laws to align with the challenges that members had identified in their own markets.

These challenges and catalysts for change include:
  • Technological advances
  • Data used to tailor insurance products, pricing and delivery
  • Retirement security and changing population demographics
  • Demand from consumers for quicker, easier purchases of annuities and other insurance products
  • Low interest rates
  • Cybersecurity considerations
  • 24-hour news cycle
  • States’ limited budgets and growing need for qualified staff

The State Ahead “foundational pillars, core three themes and goals” target these issues as the basis of the NAIC’s strategy.

Theme: Safe, Solvent and Stable Markets
  • Goals: Provide state insurance regulators with data, training and resources to support stable markets and reliable, affordable annuities and other insurance products
  • Objectives: Optimize financial data for analytics, specifically predictive analytical tools
Theme: Consumer Protection and Education
  • Goals: Ensure that consumers are aware of changes in the marketplace so they can make informed decisions.
  • Objectives: Use market data to enhance consumer protections; Provide consumers with financial literacy resources
Theme: Superior Member Services and Resources
  • Goals: Provide state insurance departments with support and resources
  • Objectives: Expand training opportunities; Provide state insurance regulators with secure, adaptable technical services; Improve management of regulatory issues

Source: National Association of Insurance Commissioners

Model Laws & Accreditation

The National Association of Insurance Commissioners serves to provide standardization and consistency within the insurance industry while accounting for the differences among the states’ legislatures and regulations.

Because of these differences, state insurance departments require a degree of flexibility so they can operate efficiently while simultaneously adhering to peer-reviewed and accepted best practices.

This is where model laws and accreditation come in.

According to the NAIC, model laws must satisfy a two-pronged test. They must first establish a “minimum national standard.” Then the members must agree to dedicate the resources needed to support the law.

If the measure doesn’t meet these criteria, the working group or task force can submit it as a guideline instead.

Model laws and guidelines, along with accreditation — NAIC certification affirming that a state’s insurance department is in compliance with industry standards — allow the NAIC to assess and verify each state’s ability to oversee the financial status of insurance companies.

How the NAIC Protects Annuity Owners

Because annuities are insurance products, the National Association of Insurance Commissioners regulates all types of annuities. In addition to the NAIC’s oversight, variable annuities are regulated by the Securities and Exchange Commission and the Financial Industry Regulatory Authority. This is because variable annuities, unlike fixed annuities, are classified as securities.

Protecting annuity and life insurance consumers is a fundamental responsibility of the NAIC. The association developed the Insurance Regulatory Information System (IRIS), a database of insurance companies, to provide state insurance departments with data on each company’s financial strength.

By alerting state commissioners to financially unstable insurers, the NAIC strives to prevent consumers from purchasing annuities from insolvent companies.

Life Insurance and Annuities (A) Committee

The Life Insurance and Annuities (A) Committee is a subgroup of the NAIC that handles issues with life insurance and annuity products. The committee comprises several working groups, including the Annuity Disclosure (A) Working Group, the Annuity Suitability (A) Working Group and the Retirement Security (A) Working Group.

Collectively, these subgroups review and revise annuity model regulations and make recommendations in alignment with the NAIC’s mission and initiatives.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: July 10, 2020

8 Cited Research Articles

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  1. National Association of Insurance Commissioners. (2018). State Ahead Strategic Plan 2018 209 2020. Retrieved from https://content.naic.org/sites/default/files/inline-files/state_ahead_strategic_plan.pdf
  2. National Association of Insurance Commissioners. (2020). Suitability in Annuity Transactions Model Regulation. Retrieved from https://www.naic.org/store/free/MDL-275.pdf
  3. National Association of Insurance Commissioners. (2020, January 13). NAIC Model Laws. Retrieved from https://content.naic.org/cipr_topics/topic_naic_model_laws.htm
  4. National Association of Insurance Commissioners. (2020, January 8). Accreditation. Retrieved from https://content.naic.org/cipr_topics/topic_accreditation.htm
  5. National Association of Insurance Commissioners. (n.d.). Life Insurance and Annuities (A) Committee. Retrieved from https://content.naic.org/cmte_a.htm
  6. National Association of Insurance Commissioners. (n.d.). Protecting the Future Infographic. Retrieved from https://www.naic.org/documents/index_protectingthefuture_infographic.pdf
  7. U.S. Securities and Exchange Commission. (2011, April 6). Fast Answers: Annuities. Retrieved from https://www.sec.gov/fast-answers/answersannuityhtm.html
  8. U.S. Securities and Exchange Commission. (2018, August 7). Letter from the Committee of Annuity Insurers. Retrieved from https://www.sec.gov/comments/s7-07-18/s70718-4186622-172758.pdf