Life Locator
All insurers offering life and annuity products must be registered with the NAIC’s life locator database. A valid email address must be provided, and the insurer must respond when search requests are made for life insurance policies or annuities covering a decedent.
Annuity Suitability
The subsequent provisions relate to fixed and variable annuities as well as individual and group annuities.
This legislation applies to:
- Any recommendation to purchase or replace an annuity made to a consumer by a producer or where no producer is involved that results in the replacement recommended.
This legislation does not apply to:
- Direct response solicitations where there is no recommendation based on information collected from the consumer
- Contracts used to fund employee pension or welfare benefit plan that is covered by the employee retirement income security act of 1974, a plan described by sections 401(A) or (K), 403 (B), 408 (K) or (P) of the internal revenue code of 1986, when the plan, for purposes of ERISA, is established or maintained by an employer, a governmental or church plan defined in section 414 of the internal revenue code of 1986 or a deferred compensation plan of a state or local government or tax-exempt organization under section 457 of the internal revenue code of 1986, a nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor, settlements of or assumptions of liabilities associated with personal injury litigation or any dispute or claim resolution process , formal prepaid funeral contracts.
It is the responsibility of the producer or company to have reasonable grounds for believing that:
- The recommendation is suitable for the consumer on the basis of the facts disclosed by the consumer as to the consumer’s investments and other insurance products and as to the consumer’s suitability information
- The consumer has been reasonably informed of various features of the annuity, including the potential surrender period and surrender charge, potential tax penalty if the consumer sells, replaces, surrenders or annuitizes the annuity, morality and expense fees, investment advisory fees, potential charges for and features of riders, limitations on interest returns, insurance and investment components and market risk
- The consumer would benefit from certain features of the annuity, including tax-deferred growth, annuitization or death or living benefit
- The particular annuity as a whole, the underlying subaccounts to which funds are allocated at the time of purchase or replacement of the annuity, and riders and similar product enhancements, if any, are suitable and, in the case of a replacement, the transaction as a whole is suitable for the consumer based on the consumer’s suitability information
- In the case of a replacement of an annuity, the replacement is suitable and shall take into consideration whether: The consumer will incur a surrender charge, be subject to the commencement of a new surrender period, lose existing benefits, including death, living or other contractual benefits, or be subject to increased fees, investment advisory fees or charges for riders and similar product enhancements. The consumer would benefit from the product enhancements. The consumer has had another annuity replacement, including a replacement within the preceding 36 months. The producer/company prior to the execution of a purchase or replacement of an annuity resulting from a recommendation shall make reasonable efforts to obtain the consumer’s suitability information.
Exemptions
A producer cannot issue an annuity recommended to a consumer unless there is a reasonable basis to believe the annuity is suitable based on the consumer’s suitability information except when:
No recommendation is made
A recommendation was made and was later found to have been prepared based on materially inaccurate information provided by the consumer
A consumer refuses to provide relevant suitability information and the annuity transaction is not recommended
A consumer decides to enter into an annuity transaction that is not based on a recommendation of the insurer or the insurance producer
Documentation
- At the time of the sale of an annuity, the producer must: Make a record of each recommendation.
- Obtain a customer-signed statement documenting a customer’s refusal to provide suitability information, if any.
- Obtain a customer-signed statement acknowledging that an annuity transaction is not recommended if the customer decides to enter into an annuity transaction that is not based on the insurance producer’s or insurer’s recommendation
Supervision of recommendations: An insurer shall establish a supervision system that is reasonably designed to achieve the insurer’s and its insurance producer’s compliance with this article.
The producer may not dissuade a consumer from:
- Truthfully responding to an insurer’s request for confirmation of suitability information
- Filing a complaint
- Cooperating with the investigation of a complaint
Producer training
Authority to sell shall complete at least four CE credits in an annuity training course or courses. CE must be finished on or before the end of the producer’s next complete license period occurring after the effective date. CE must be finished on or before the end of the producer’s first complete license period if licensed after the effective date. Reciprocity with other states with regard to training.
Recordkeeping
Must be able to make available to the commissioner records of information collected from the consumer and other information used in making the recommendations that were the basis for the transaction for five years after the insurance transaction is completed by the insurer. These records can be kept in any form.