Throughout 2017 and into the New Year, one of the great areas for discussion for many carriers was the potential impact of the new DOL Fiduciary Rules. As drafted by the prior Administration in Washington, these rules had the potential to significantly impact wide swaths of the annuities/retirement business for carriers and, while the DOL’s final decision at the Federal level remains in a state of limbo, as we noted last week, States such as New York are beginning to take up the regulatory mantle.
Much less discussed than the Fiduciary rule was another set of changes that the DOL planned to implement covering disability claims including the process for adjudicating them and making information transparently available to key participants in the value chain. These rules, which also date back to the prior administration in Washington, were put on hold by the DOL in October of last year to allow a 90-day review period. The DOL press release explaining the decision noted that the comment period had a termination date of December 11, 2017.
This week A.M. Best reports that the new rule on disability income insurance has been implemented by the DOL in spite of industry objections. The go-live date will be April 1, 2018.
Part of the industry argument for avoiding the implementation of this specific rule related to the cost for administration and the potential upward pressure this will place on disability insurance premiums in the future. Following the comment period, which apparently produced some 200 letters, the DOL concluded that “the comments did not establish that the final rule imposes unnecessary regulatory burdens or significantly impairs workers’ access to disability insurance benefits.” Carriers will move quickly now to respond to the requirements of the new regulations.
While many argued that the new rules represent a “burden” to the industry, one reality is that the approach to this implementation offers a level of consistency which can be a value to many. As the Fiduciary Rule discussion has shown, one consequence of reduced involvement at the Federal level is the potential for State regulators to step up activities, with the potential consequence of even greater complexity and implementation costs. While many prefer a “lighter touch” when it comes to the regulatory environment, industry participants should keep in mind that a pull-back by the DOL could have unanticipated results that may be even more burdensome. While carriers prepare now for full implementation, the mantra that being careful what you ask for can be sage counsel.
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