SB320: Bill Text

SB320,11,20 (b) "Recommendation" means advice provided by an insurance intermediary, or an insurer if no intermediary is involved, to an individual senior consumer that results in the purchase or exchange of an annuity in accordance with that advice.

SB320,11,25 (c) "Senior consumer" means a person who is 65 years of age or older. The term includes any joint owner of an annuity who is less than 65 years of age if at least one joint owner is 65 years of age or older, and any prospective joint purchaser of an annuity who is less than 65 years of age if at least one prospective joint purchaser is 65 years of age or older.

SB320,12,8 (2) Duties of insurers and insurance intermediaries with regard to recommendations. (a) Except as provided in par. (c), an insurance intermediary, or insurer if no intermediary is involved, may not recommend to a senior consumer the purchase or exchange of an annuity if the recommendation results in an insurance transaction or series of insurance transactions unless the intermediary or insurer has reasonable grounds to believe that the recommendation is suitable for the senior consumer on the basis of facts disclosed by the senior consumer as to his or her investments, other insurance products, and financial situation and needs.

SB320,12,11 (b) Before making a recommendation described in par. (a), an insurance intermediary, or insurer if no intermediary is involved, shall make reasonable efforts to obtain information concerning all of the following:

SB320,12,12 1. The senior consumer's financial status.

SB320,12,13 2. The senior consumer's tax status.

SB320,12,14 3. The senior consumer's investment objectives.

SB320,12,16 4. Any other information that is reasonably appropriate for determining the suitability of a recommendation to the senior consumer.

SB320,12,19 (c) An insurance intermediary, or insurer if no intermediary is involved, has no obligation under par. (a) to a senior consumer related to a recommendation if the senior consumer does any of the following:

SB320,12,21 1. Refuses to provide relevant information requested by the insurer or insurance intermediary.

SB320,12,22 2. Fails to provide complete or accurate information.

SB320,12,24 3. Decides to enter into an insurance transaction that is not based on a recommendation of the insurer or insurance intermediary.

SB320,13,4 (d) Any recommendation of an insurer or insurance intermediary that, under par. (c), is not subject to the obligation under par. (a) shall be reasonable under all circumstances actually known to the insurer or insurance intermediary at the time the recommendation is made.

SB320,13,9 (3) Insurer's supervisory responsibility. (a) An insurer either shall ensure that a system to supervise recommendations that is reasonably designed to achieve compliance with this section is established and maintained by complying with pars. (c) to (e), or shall establish and maintain such a system, which shall include at least all of the following:

SB320,13,10 1. Maintaining written procedures.

SB320,13,12 2. Conducting periodic reviews of its records that are reasonably designed to assist in detecting and preventing violations of this section.

SB320,13,17 (b) A general agent or independent agency either shall adopt a system established by an insurer to supervise recommendations of its insurance intermediaries that is reasonably designed to achieve compliance with this section, or shall establish and maintain such a system, which shall include at least all of the following:

SB320,13,18 1. Maintaining written procedures.

SB320,13,20 2. Conducting periodic reviews of records that are reasonably designed to assist in detecting and preventing violations of this section.

SB320,13,24 (c) An insurer may contract with a 3rd party, which may be a general agent or independent agency, to establish and maintain a system of supervision as required under par. (a) with respect to insurance intermediaries under contract with or employed by the 3rd party.

SB320,14,5 (d) An insurer shall make reasonable inquiry to ensure that any 3rd party with which the insurer contracts under par. (c) is performing the functions required under par. (a) and shall take such action as is reasonable under the circumstances to enforce the contractual obligation to perform the functions. An insurer may comply with its obligation to make reasonable inquiry in all of the following ways:

SB320,14,9 1. The insurer annually obtains from a senior manager of the 3rd party who has responsibility for the delegated functions a representation that the 3rd party is performing the required functions and that the senior manager has a reasonable basis for making the representation.

SB320,14,13 2. The insurer, based on reasonable selection criteria, periodically selects 3rd parties contracting under par. (c) for reviews to determine whether the 3rd parties are performing the required functions. The insurer shall perform those procedures to conduct the reviews that are reasonable under the circumstances.

SB320,14,17 (e) An insurer that contracts with a 3rd party under par. (c) and that complies with the supervisory requirement under par. (d) satisfies its responsibilities under par. (a) as to insurance intermediaries under contract with or employed by the 3rd party.

SB320,14,19 (f) An insurer is not required under par. (a), and a general agent or independent agency is not required under par. (b), to do any of the following:

SB320,14,21 1. Review, or provide for the review of, all insurance intermediary solicited transactions.

SB320,14,24 2. Include in its system of supervision an insurance intermediary's recommendations made to senior consumers of products other than annuities offered by the insurer, general agent, or independent agency.

SB320,15,4 (g) A general agent or independent agency contracting with an insurer under par. (c) shall promptly, upon request by the insurer under par. (d), provide a representation as described in par. (d) 1. or give a clear statement that it is unable to meet the representation criteria.

SB320,15,6 (h) No person may provide a representation under par. (d) 1. unless the person satisfies all of the following:

SB320,15,8 1. The person is a senior manager with responsibility for the delegated functions.

SB320,15,9 2. The person has a reasonable basis for making the representation.

SB320,15,14 (4) National Association of Securities Dealers Conduct Rules. Compliance with the National Association of Securities Dealers Conduct Rules pertaining to suitability satisfies the requirements under sub. (2) for the recommendation of variable annuities. Nothing in this subsection, however, limits the commissioner's ability to enforce this section.

SB320,15,15 (5) Remedial measures. The commissioner may do any of the following:

SB320,15,18 (a) Order an insurer to take reasonably appropriate corrective action for any senior consumer harmed by a violation of this section by the insurer or the insurer's insurance intermediary.

SB320,15,21 (b) Order an insurance intermediary to take reasonably appropriate corrective action for any senior consumer harmed by a violation of this section by the insurance intermediary.

SB320,15,25 (c) Order a general agent or independent agency that employs or contracts with an insurance intermediary to sell, or solicit the sale of, annuities to senior consumers to take reasonably appropriate corrective action for any senior consumer harmed by a violation of this section by the insurance intermediary.

SB320,16,3 (6) Penalties; mitigation. (a) Any person who violates this section is subject to the penalties provided under s. 601.64, suspension or revocation of a license or certificate of authority, and an order under s. 601.41 (4).

SB320,16,7 (b) A penalty under par. (a) for a violation of sub. (2) (a), (b), or (d), including a forfeiture, may be reduced or eliminated to the extent provided by rule of the commissioner if corrective action is taken for the senior consumer promptly after the violation is discovered.

SB320,16,10 (c) The commissioner may promulgate rules related to the reduction or elimination of penalties for violations of this section on the basis of prompt action taken to correct any harm caused to senior consumers by the violations.

SB320,16,18 (7) Record keeping. An insurer and an insurance intermediary, including a general agent and an independent agency, shall maintain, or be able to make available to the commissioner, records of the information collected from a senior consumer and other information used in making a recommendation that was the basis for an insurance transaction for 6 years after the insurance transaction is completed by the insurer, except as otherwise permitted by the commissioner by rule. An insurer may, but is not required to, maintain records on behalf of an insurance intermediary, including a general agent and an independent agency.

SB320,16,19 (8) Exemptions. This section does not apply to any of the following:

SB320,16,21 (a) Direct response solicitations in which no recommendation is made based on information collected from the senior consumer.

SB320,16,22 (b) Recommendations related to contracts used to fund any of the following:

SB320,16,24 1. An employee pension or welfare benefit plan that is covered by the federal Employee Retirement and Income Security Act.

SB320,17,2 2. A plan described in section 401 (a) or (k), 403 (b), or 408 (k) or (p) of the Internal Revenue Code, if the plan is established or maintained by an employer.

SB320,17,6 3. A government or church plan as defined in section 414 of the Internal Revenue Code, a government or church welfare benefit plan, or a deferred compensation plan of a state or local government or tax exempt organization under section 457 of the Internal Revenue Code.

SB320,17,8 4. A nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor.

SB320,17,10 5. A settlement or assumption of liability associated with personal injury litigation or any dispute or claim resolution process.

SB320,17,11 6. A formal prepaid funeral or burial contract.

SB320, s. 27 Section 27. 632.435 (1) (intro.) of the statutes is amended to read:

SB320,17,17 632.435 (1) (intro.) In the case of contracts issued on or after the operative date of this section as defined in sub. (12), no No contract of annuity shall be delivered or issued for delivery in this state unless it contains in substance the following provisions or corresponding provisions which in the opinion of the commissioner are at least as favorable to the contract holder:

SB320, s. 28 Section 28. 632.435 (1) (a) of the statutes is amended to read:

SB320,17,22 632.435 (1) (a) Upon cessation of payment of considerations under a contract, or upon the written request of the contract owner, the company will shall grant a paid-up annuity on a plan stipulated in the contract of such value as is specified in subs. (5) to (8) and (10).

SB320, s. 29 Section 29. 632.435 (1) (b) of the statutes is amended to read:

SB320,18,7 632.435 (1) (b) If a contract provides for a lump sum settlement at maturity or at any other time, upon surrender of the contract at or prior to the commencement of any annuity payments, the company will shall pay in lieu of any paid-up annuity benefit a cash surrender benefit of such amount as is specified in subs. (5), (6), (8), and (10). The company shall may reserve the right to defer the payment of such cash surrender benefit, for a period of not exceeding 6 months after demand therefor with surrender of the contract, if the company receives written approval from the commissioner upon the company's written request, which shall address the deferral's necessity and equitability to all policyholders.

SB320, s. 30 Section 30. 632.435 (4) of the statutes is repealed and recreated to read:

SB320,18,11 632.435 (4) (a) In this subsection, "net considerations" means, for a given contract year, an amount equal to 87.5 percent of the gross considerations credited to the contract during that contract year.

SB320,18,15 (b) The minimum nonforfeiture amount at or prior to the commencement of any annuity payments shall be equal to an accumulation up to such time, at one or more rates of interest as indicated in pars. (c) to (e), of the net considerations paid prior to such time, decreased by the sum of all of the following:

SB320,18,17 1. Any prior withdrawals from or partial surrenders of the contract accumulated at one or more rates of interest as indicated in pars. (c) to (e).

SB320,18,19 2. An annual contract charge of $50, accumulated at one or more rates of interest as indicated in pars. (c) to (e).

SB320,18,21 3. Any premium tax paid by the company for the contract, accumulated at one or more rates of interest as indicated in pars. (c) to (e).

SB320,18,23 4. The amount of any indebtedness to the company on the contract, including interest due and accrued.

SB320,19,3 (c) The interest rate used to determine minimum nonforfeiture amounts shall be an annual rate of interest that is the lower of 3 percent and the higher of either of the following:

SB320,19,10 1. The 5-year constant maturity treasury rate reported by the federal reserve board as of a date, or average over a period, specified in the contract no longer than 15 months prior to the contract issue date or redetermination date under par. (d), less 125 basis points or, if the contract provides substantive participation in an equity indexed benefit during the period or term, the contract may increase the reduction by up to an additional 100 basis points to reflect the value of the equity index benefit, and rounded to the nearest one-twentieth of 1 percent.

SB320,19,11 2. One percent.

SB320,19,18 (d) The interest rate determined under par. (c) shall apply for an initial period and may be redetermined for additional periods. The redetermination date, basis, and period, if any, shall be stated in the contract. The basis is the date or average over a specified period that produces the value of the 5-year constant maturity treasury rate to be used at each redetermination date. The method for determining the interest rate under par. (c) shall be specified in the contract if the interest rate will be reset.

SB320,19,25 (e) The present value at the contract issue date, and at each redetermination date, of the additional reduction under par. (c) 1. for substantive participation in an equity index benefit may not exceed the market value of the benefit. The commissioner may require a demonstration that the present value of the additional reduction does not exceed the market value of the benefit. The commissioner may disallow or limit the additional reduction if the commissioner determines that the demonstration is unacceptable.

SB320,20,5 (f) The commissioner may promulgate rules for the implementation of par. (e) and to provide for further adjustments to the calculation of minimum nonforfeiture amounts for contracts that provide substantive participation in an equity index benefit and for other contracts for which the commissioner determines adjustments are justified.

SB320, s. 31 Section 31. 632.435 (5) of the statutes is amended to read:

SB320,20,12 632.435 (5) Any paid-up annuity benefit available under a contract shall be such that its present value on the date annuity payments are to commence is at least equal to the minimum nonforfeiture amount on that date. Such present value shall be computed using the mortality table, if any, and the interest rate or rates specified in the contract for determining the minimum paid-up annuity benefits guaranteed in the contract.

SB320, s. 32 Section 32. 632.435 (12) of the statutes is repealed.

SB320, s. 33 Section 33. Chapter 641 of the statutes, as affected by 2001 Wisconsin Act 109, is repealed.

SB320, s. 34 Section 34. 645.58 (1) (intro.) of the statutes, as affected by 2003 Wisconsin Act 44, is amended to read:

SB320,20,23 645.58 (1) Liability. (intro.) Except as provided in this subsection and in s. 646.35 (8) (e), the amount recoverable by the liquidator from a reinsurer shall not be reduced as a result of delinquency proceedings, regardless of any provision in the reinsurance contract or other agreement. Payment made directly to an insured or other creditor shall not diminish the reinsurer's obligation to the insurer's estate except when any of the following applies:

SB320, s. 35 Section 35. 646.01 (1) (a) 2. k. of the statutes is created to read:

SB320,20,25 646.01 (1) (a) 2. k. Risk-sharing plans under chs. 149 and 619.

SB320, s. 36 Section 36. 646.01 (1) (a) 2. L. of the statutes is created to read:

SB320,21,2 646.01 (1) (a) 2. L. The patients compensation fund under s. 655.27.

SB320, s. 37 Section 37. 646.01 (1) (b) 1. of the statutes is repealed and recreated to read:

SB320,21,6 646.01 (1) (b) 1. Any portion of a life insurance policy or annuity contract that is not guaranteed by the insurer or under which the risk is borne by the policy or policyholder.

SB320, s. 38 Section 38. 646.01 (1) (b) 9. (intro.) of the statutes is renumbered 646.01 (1) (b) 9. and amended to read:

SB320,21,13 646.01 (1) (b) 9. Any self-funded, self-insured, or partially or wholly uninsured plan of an employer or other person to provide life insurance, annuity , or disability benefits to its employees or members to the extent that the plan is self-funded, self-insured, or uninsured, including benefits payable by an employer or other person under any of the following:.

SB320, s. 39 Section 39. 646.01 (1) (b) 9. a. of the statutes is repealed.

SB320, s. 40 Section 40. 646.01 (1) (b) 9. b. of the statutes is repealed.

SB320, s. 41 Section 41. 646.01 (1) (b) 9. c. of the statutes is repealed.

SB320, s. 42 Section 42. 646.01 (1) (b) 9. d. of the statutes is repealed.

SB320, s. 43 Section 43. 646.01 (1) (b) 11. of the statutes is repealed and recreated to read:

SB320,21,19 646.01 (1) (b) 11. Any warranty or service contract.

SB320, s. 44 Section 44. 646.01 (1) (b) 11m. of the statutes is created to read: