WASHINGTON — State Farm Insurance saysit will not be accepting liability under the Best Interest Contract(BIC) on the sale of annuities or mutual funds by the more than12,000 of its agents throughout the U.S. who have licenses to sellsecurities.

At the same time, Allstate, USAA and Nationwide, three otherinsurers with large property casualty divisions whose captiveagents also sell investment products, appear to have decided toremain in the commission investment business.

However, in comments to us, these companies declined to bespecific about how they will comply with the new Department ofLabor regulation fiduciary standard rule.

One reason for that is that they could be awaiting thedisposition of various lawsuits that seek to delay implementationof the rule pending further court proceedings.

Act within clients' best interests

This rule is being phased in effective April 2017. It requiresagents and advisors to act within their clients' best interestswhen selling investment products for a fee or commission into theircustomers' IRA and 401 (k) accounts as well overseen underthe Employee Retirement Income Security Act of1974 (ERISA). Currently, the sale of these products is coveredunder the less strict suitability standard.

In comments in August, Jason L. Smith, CEO and founder ofClarity 2Prosperity in Cleveland, anindependent marketing organization, theorized that issuers anddistributors are delaying action until they see what the courtsdo.

His firm has filed to offer the best interest contract exemption(BICE) to its independent agents by applying to be a "financialinstitution" under Department of Labor rules. But only sixIMOs have applied for FI status, Smith said. Many others may beawaiting action on the various lawsuits. "I think many areputting their head in the sand and hoping that through the lawsuitsthe whole DOL thing goes away," Smith said.

A federal district court in Washington, D.C. heard argumentsAug. 25 in one case filed by the National Association of FixedAnnuities. The judge declined to rule immediately, but appeared toindicate that NAFA didn't appear to meet the threshold required todelay implementation of the rule.

State Farm's actions, however, offer insight intothe potential reaction by various businesseswithin the financial services industry to the new rule.State Farm and Allstate may primarily sell auto and homeinsurance to customers nationwide, just as USAA does to military orretired military personnel worldwide. But investment products arean important part of their portfolios.

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Many of their agents are licensed to sell fixed annuitiesthrough state licenses and variable annuities and mutual fundsthrough securities licenses.

Two-thirds of State Farm's 18,000 agents sell investmentproducts, for example.

State Farm, in comments by Phil Supple, its director of publicrelations, said that as of next April, State Farm will sell and/orservice mutual funds, variable products and tax-qualified bankdeposit products through a self-directed customer call center.

He said State Farm will continue to offer fixed annuitiesthrough authorized agents. (State Farm does not offer fixed indexedannuities.) He said State Farm agents "will also continue to servecustomers for all other insurance and financial servicesneeds."

The "self-directed" call center will be "a place where customerscan learn about what retail investment products State Farm offers,"Supple said. "Customers will make their own decisions regardingtheir investments," he added, but declined to disclose whetherthose answering the calls at the centers will be licensed to sellinvestment products or able to earn a commission on the sale ofthose products.

Impact on agents' income?

Supple said it is "not really possible" to answer whether or notallowing agents to sell investment products will have a deep impacton their income. "Income would have varied greatly from agent toagent," Supple said.  Besides, he said, "any actualnumbers, we believe, would be proprietary."

USAA, Allstate and Nationwide were somewhat opaque in theirresponses.

Arguments in a case similar to the NAFA lawsuit in that itinvolves fixed indexed annuities will be held Sept. 21 in federalcourt in Kansas. The suit was filed by Market Synergy Group.

And nine groups, including the U.S. Chamber of Commerce, havefiled suit in Texas seeking an injunction against the rule. Thecase is being heard in Federal District Court in Dallas and adecision could be handed down as early as October.

In its statement, USAA said, "We are committed to adhering toregulatory requirements and to ensuring our members receive thefinancial products, services, advice and solutions they expect anddeserve."

The statement added that, "USAA will inform members of expectedchanges to our delivery of those products and services before therequired compliance date in 2017.  As usual, we willcontinue to monitor development of the DOL Fiduciary Rule with ourmembers' interest in mind.

In its statement, Allstate said that, "Many middle-marketcustomers rely on Allstate for access to life and retirementproducts. We are committed to providing the products that ourcustomers expect from Allstate agencies and financial professionalsas we adapt to the Department of Labor fiduciary rule scheduled tobegin taking effect in April 2017."

Related: Will proposed fiduciary rule make insurance agentsvulnerable to lawsuits?