Last Updated 8/2/2022
Introduction: Retirement security is a major national concern in the U.S. with significant impacts for the insurance sector. Whether starting a career or counting the days to retirement, financial and insurance planning should be a priority for Americans of all ages. Retirement security encompasses a broad spectrum of financial tools, including many insurance-related products and services such as life insurance, annuities, and long-term care insurance. The marketing and sales of these products are also areas which fall under the retirement security umbrella. State insurance departments and the NAIC can play an important role in helping American consumers prepare for financial security as insurance is a key part of a comprehensive retirement plan.
Background: Advances in healthcare have led to longer life expectancies. At the same time, many employers have moved away from defined benefit pension plans toward defined contribution plans such as a 401(k). As such, the responsibility for funding and managing retirement assets has shifted solidly to the consumer. This is a daunting task for many Americans.
Americans face significant obstacles in preparing and saving for a financially secure retirement. Many Americans are dramatically under-saved. According to a report by the Insured Retirement Institute, only 54% of Baby Boomers have any retirement savings at all. Moreover, only a quarter of Baby Boomers are confident their savings are sufficient to carry them through all their retirement years. Financial literacy skills are lacking for many, leaving them unprepared to accumulate and manage the substantial assets necessary to assure a comfortable retirement. Interestingly, a 2017 Mercer report found “financial courage” leads to better individual outcomes than even financial literacy.
Insurance products can play an important part in overcoming these challenges. Life insurance proceeds can potentially help a beneficiary enjoy a financially secure retirement by replacing years of retirement savings cut short by a premature or unexpected death. Annuities, while not suitable in every situation, can provide a guaranteed income stream in retirement for some consumers. Additionally, as at least 70% of Americans over the age of 65 will require long-term care (LTC) services in their lifetime, long-term care insurance can be an effective hedge against the high costs associated with this kind of commonly needed care.
Status: The NAIC is reviewing continuing education requirements for insurance producers to ensure knowledge of suitability requirements and prohibitions on unfair marketing practices. In addition, the NAIC established the Retirement Security (A) Working Group to develop an education campaign and curricula, anti-fraud alerts, and other work products to support and promote retirement security. The group disbanded in 2020, but the Life Insurance and Annuities (A) Committee continues to monitor developments in this area.
The NAIC is reviews and updates NAIC model laws and regulations, particularly in the area of annuities, to ensure they continue to meet public policy needs. In 2016, the NAIC launched a national Life Policy Locator Service in 2016 to assist individuals in locating life insurance policies, especially in cases where the requestor or beneficiary has little to no information about the policy. The consumer tool matched 8,210 beneficiaries with lost or misplaced life insurance policies or annuities, totaling $92.5 million returned to consumers, in its first year alone.
In August of 2017, CIPR held an event on Enhancing Protections and Empowering Consumers for a Secure Retirement. The event focused on identifying unforeseen risk pre-retirees and post-retirees might face in retirement. The event also explored the impact of the U.S. Department of Labor legislation on fiduciary responsibility.
In the area of Innovation, the NAIC is looking to identify and address areas in current laws and regulations that unnecessarily stifle innovation and new technologies. The Innovation, Cybersecurity and Technology (H) Committee is also charged with monitoring technology developments in the insurance space that may impact the state insurance regulatory framework.
Committees Related to This Topic
Baby Boomer Expectations for Retirement
April 2017, Insured Retirement Institute
Consumer Alert: Retirement Planning Checklist
June 2016, NAIC
Consumer Alert: Finding a Lost Life Insurance Policy
August 2016, NAIC
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