To: EBSA, E-ORI - EBSA

Subject: RIN 1210-AB32

Importance: High

Employee Benefits Security Administration Via: e-ORI@dol.gov

U.S. Department of Labor Subject line: RIN 1210-AB32

200 Constitution Avenue, NW

Washington, DC 20201

Re: Comment Period of Conflict of Interest Rule and Related Exemptions

Ladies and Gentlemen:

I work within the financial services segment of the fixed insurance industry. It is clear this 

proposed rule affects many other industries including banking, investment advisory services, 

broker dealers, and employee benefit plans just to name a few. I will be commenting on the 

impact this rule will have on the fixed insurance industry and the consumers served by this 

industry.

Due to the breadth of this rule, it is difficult to comment fully on it in the time provided so I will 

limit my commentary to what I view as the largest issues which cause the rule to be unworkable 

within the fixed insurance industry and how the rule affects consumers.

How the rule affects the fixed insurance industry:

The Department of Labor (DOL) rule would dismantle, eliminate or radically alter five important 

areas of our industry.

First, the distribution and sales business model for fixed insurance products would no longer 

comply with federal rules. Agents would no longer be able to earn commissions on sales where 

the source of funds was qualified retirement account money. Instead, they would be forced into 

a “fiduciary” model requiring they charge a fee for advice rather than be compensated by the 

insurance company that created the product being sold.

Second, the regulatory protections afforded consumers through the oversight and conflict 

resolution authority available through their state department of insurance would be largely 

scrapped. I will comment on this further below in my section on how this rule affects 

consumers.

Third, the products, processes, management structure and software platforms which we currently 

possess in our industry will not comply, in any way, with a fee-based planning model proposed 

by the DOL. Our products are designed without annual advisory fees. These fees would need to 

be extracted from the account values within our fixed products. Our industry has no ability to 

subtract advisory fees from contract values. Further, doing so would have a detrimental impact 

on contract values which would cause the products to underperform and fall below statutory 

minimum guarantee requirements. In other words, the rule conflicts with minimum guaranteed 
value protection existing in each state where these savings products are sold.

Fourth, the legal construct of our industry, including that of the Department of Insurance, is 

based on agency law and contractual obligations between the insurance company, the 

distribution firms, the agents and the consumers. This entire structure would be tossed out with 

no viable substitute available. Insurance advisors are governed under the laws of agency and 

investment advisors under the laws of fiduciary. 

The common insurance company selling agreements clearly state the representatives are an agent 

of the insurance company. This contractual agreement will violate the proposed rule. New 

agreements for hundreds of thousands of insurance agents must be established and executed and 

these small business men and women in the field will have to sort out exactly how to survive 

with little or any guidance from the insurance companies who will no longer be in a supervisory 

position. This alone will carry significant expenses which will eliminate entire careers. 

An agent may not alter the contract or the commitments within the policies or contracts created 

by the insurance company. In fact, agents are prohibited from doing so. An agent may not 

negotiate benefits on behalf of the client. An agent may not take an annuity on an individual's 

life and 'sell' it to another party in a bid market. The fiduciary rule rightfully resides in the 

investment community. Investment advisors and portfolio managers can negotiate price, alter 

the investment mix and buy and sell in a bid market. This is why they should be held to a 

fiduciary standard. Fixed insurance products simply do not fit within this context.

Fifth, all existing fixed annuities were never priced for advisors to subtract fees and no universal 

software platform exists for insurance companies to comply, report and manage these fees on 

behalf of advisors. Without an exemption for fixed insurance products, the DOL rule would 

make obsolete an entire industry of quality fixed insurance products which have some of the 

lowest consumer complaint levels in the entire financial services industry in America. This will 

eliminate competition, jobs, and consumer choice.

Without new industry-wide selling agreements, new industry-wide systems and infrastructure, 

new industry-wide products and industry-wide embedded fee structures, the insurance companies 

won’t have products to bring to market. They will also lose their management and supervisory 

control over agents as will the Department of Insurance. The impact will be the loss of 

thousands of jobs and hundreds of millions of dollars.

How the rule affects consumers:

Consumers will pay more. Annuities for example, are long-term savings vehicles. It is not 

unusual for policy holders to remain in their annuity for up to a decade or more. Ongoing annual 

advisory fees will have an annual negative impact on consumer account values. Over the years, 

these fees will far outpace the current commission based model costing consumers millions of 

dollars more in advisory fees.

Consumers will lose innovative features and benefits based upon their needs. Many of our 

product include innovative feature which provide enhanced benefits for certain events such as 
medical impairments. These values are often leveraged from the account value and based, to 

some degree, upon changes in life expectancy as a person becomes impaired. Annual fees 

extracted from the account values would be magnified when these enhance benefits are 

triggered. Consumers would pay a heavy price under this new model. 

Consumers will lose income. Our products also offer lifetime income riders which carry separate 

account values. These accounts would also be affected by annual advisory fees causing the 

future income to be reduced. 

Consumers will lose choice, a quality process and protection. “The DOL has defined the word 

fiduciary in such a narrow manner; they accommodate only fee-based planning models. This 

fails to recognize the decades-old, high-consumer satisfaction distribution model currently in 

existence in the insurance industry. Within the insurance industry, high duties and 

responsibilities already exist. In fact, they could readily be referred to as fiduciary duties. The 

problem is the DOL rule will place this duty in the wrong hands.

One definition of “fiduciary” describes the word as, “A person in whom another has placed the 

utmost trust and confidence to manage and protect property or money. The relationship wherein 

one person has an obligation to act for another's benefit.”

I believe there is a fiduciary duty in the insurance industry already, and it is one that can be 

rightfully defined. The conflict created by the DOL is how they have defined the fiduciary role 

and who they are applying the role to. In the fixed insurance industry, consumers are not 

purchasing an investment they can later sell in a bid market. They are reviewing and purchasing 

a legal contract between themselves and the insurance company. 

Prior to going to market, exhaustive pricing is conducted by sophisticated actuaries who develop 

features and benefits believed to serve the needs of consumers. These contracts, once priced, are 

then filed with the Department of Insurance in each state for review and to assure the contract 

meets the standard non-forfeiture rules. This essentially assures the contracts will provide a 

legally required guaranteed minimum return prior to going to market. Once approved, the 

insurance company can market their product.

Within the contract, the insurance company clearly defines benefits, promises and 

commitments. The insurance company receives the policyholder funds and manages these funds 

along with the company's own assets. The policyholder is guaranteed to receive the benefits, 

promises and commitments granted within the policy. In fact, the company is now legally bound 

to provide these benefits, etc. The company must fulfill their obligations. In this way, the 

insurer is acting as a fiduciary. 

The policyholder also receives a free-look period, typically 30 days, to examine the 

contract. During this period they may return it for a full refund. Additionally, the state 

Department of Insurance acts as a powerful advocate on behalf of the policyholder, and can 

rapidly correct a bad situation as they compel the insurance company to refund money if an 

inappropriate transaction takes place. 
In the fiduciary model, the Department of Insurance will be unable to act on behalf of the 

consumer. If a fiduciary maintains they did nothing wrong in a given situation, it will need to be 

resolved through legal channels. 

As an example, consider how the Securities and Exchange Commission handles complaints 

today. The SEC will not cause transactions to be reversed and investors made whole. Rather, 

they leave it up to the legal process which involves expensive litigation costs which small 

investors cannot afford to pay. To quote the SEC’s own website, “...we cannot act as a judge or 

an arbitrator and force a broker, brokerage firm, or company to resolve your complaint.” 

To read more about SEC complaint resolution practices check out 

http://edgar.sec.gov/investor/pubs/howoiea.htm

The current fixed insurance model provides greater protection to the consumer and does so at a 

lower cost to the consumer.

Fixed insurance products are not investments and the fiduciary standard as described by the 

DOL, simply fails to recognize the subtleties of an entire industry and the governance 

surrounding it. 

Defining the fiduciary the role of an insurance company might be a wise choice and the DOL 

may want to consider their role as I have described above. Applying this burden to agents who 

cannot modify or structure the contracts is not workable. Agents are already monitored and 

required to provide suitable recommendations for the consumers and the insurance company 

works on the consumer’s behalf to fulfill all contractual obligations. The Department of 

Insurance advocates for consumers and holds insurance companies accountable to their 

obligations and financial duties. This explains the high satisfaction rate reported by policyholders 

throughout our great nation. Our industry enjoys the lowest complaint rates of any major 

financial services discipline.

Agents representing fixed insurance products should be granted a seller's exemption within the 

proposed DOL rule.

Respectfully submitted,