Lost in the din of the debate over the Department of Labor’s Fiduciary Rule is the reality that the life insurance industry is not even being held the suitability standard, yet.
Don’t believe me? Look what I found buried in the last pages of a mandatory Continuing Education course I’m presently taking:
Traditionally, the legal requirement that a life insurance recommendation made to a client be suitable for that client has applied principally to a recommendation involving variable products, because they are considered securities. Generally, the legal limitation of the requirement for suitability—that it affects only the recommendation of securities—still applies.Paul J. Winn, CLU, ChFC; Ethical Practice Standards for Today's Producer, Section 7.1, bold-face type added
Translation: in most cases, life insurance buyers are not even protected by the relatively anemic suitability standard of professional care.
In layman’s terms, that means it’s currently “open-season,” and, indeed, has always been “open season,” on people buying traditional life insurance products. Products like traditional whole life, universal life, term life, and quite possibly even stock-market-indexed life insurance and annuity products.
No wonder the life insurance industry is fighting so vigorously against the fiduciary standard of care! It’s not even being held to the suitability standard, yet!
© Michael C. Burton, 2016 and all years.