SB572: Bill Text

SB572,5,3 3. Financial situation and needs, including the financial resources used for the funding of the annuity.

SB572,5,4 4. Financial experience.

SB572,5,5 5. Financial objectives.

SB572,5,6 6. Intended use of the annuity.

SB572,5,7 7. Financial time horizon.

SB572,5,8 8. Existing assets, including investment and life insurance holdings.

SB572,5,9 9. Liquidity needs.

SB572,5,10 10. Liquid net worth.

SB572,5,11 11. Risk tolerance.

SB572,5,12 12. Tax status.

SB572, s. 7 Section 7. 628.347 (2) (title) of the statutes is amended to read:

SB572,5,15 628.347 (2) (title) Duties of insurers and insurance intermediaries with regard to recommendations and issuance of annuities .

SB572, s. 8 Section 8. 628.347 (2) (a) of the statutes is renumbered 628.347 (2) (a) (intro.) and amended to read:

SB572,6,2 628.347 (2) (a) (intro.) Except as provided in par. (c), an insurance intermediary, or insurer if no intermediary is involved, may not recommend In recommending to a consumer the purchase of an annuity, or the exchange of an annuity if the recommendation that results in an insurance transaction or series of insurance transactions unless the, an insurance intermediary, or insurer has if no intermediary is involved, shall have reasonable grounds to believe that the recommendation is suitable for the consumer on the basis of facts disclosed by the consumer as to his or her investments, other insurance products, and financial situation and needs., including the consumer's suitability information, and that all of the following are true:

SB572, s. 9 Section 9. 628.347 (2) (a) 1. of the statutes is created to read:

SB572,6,9 628.347 (2) (a) 1. The consumer has been reasonably informed of various features of the annuity, such as the potential surrender period and surrender charge, potential tax penalty if the consumer sells, exchanges, surrenders, or annuitizes the annuity, mortality and expense fees, investment advisory fees, potential charges for and features of riders, limitations on interest returns, insurance and investment components, and market risk.

SB572, s. 10 Section 10. 628.347 (2) (a) 2. of the statutes is created to read:

SB572,6,12 628.347 (2) (a) 2. The consumer would benefit from certain features of the annuity, such as tax-deferred growth, annuitization, or death or living benefit.

SB572, s. 11 Section 11. 628.347 (2) (a) 3. of the statutes is created to read:

SB572,6,18 628.347 (2) (a) 3. The particular annuity as a whole, the underlying subaccounts to which funds are allocated at the time of purchase or exchange of the annuity, and riders and similar product enhancements, if any, are suitable, and in the case of an exchange or replacement, the transaction as a whole is suitable, for the particular consumer based on his or her suitability information.

SB572, s. 12 Section 12. 628.347 (2) (a) 4. of the statutes is created to read:

SB572,6,22 628.347 (2) (a) 4. In the case of an exchange or replacement of an annuity, the exchange or replacement is suitable, including taking into consideration all of the following:

SB572,7,2 a. Whether the consumer will incur a surrender charge, be subject to the commencement of a new surrender period, lose existing benefits, such as death, living, or other contractual benefits, or be subject to increased fees, investment advisory fees, or charges for riders and similar product enhancements.

SB572,7,4 b. Whether the consumer would benefit from product enhancements and improvements.

SB572,7,6 c. Whether the consumer has had another annuity exchange or replacement and, in particular, an exchange or replacement within the preceding 36 months.

SB572, s. 13 Section 13. 628.347 (2) (b) (intro.) of the statutes is renumbered 628.347 (2) (b) and amended to read:

SB572,7,12 628.347 (2) (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 the consumer's suitability information concerning all of the following:.

SB572, s. 14 Section 14. 628.347 (2) (b) 1. of the statutes is repealed.

SB572, s. 15 Section 15. 628.347 (2) (b) 2. of the statutes is repealed.

SB572, s. 16 Section 16. 628.347 (2) (b) 3. of the statutes is repealed.

SB572, s. 17 Section 17. 628.347 (2) (b) 4. of the statutes is repealed.

SB572, s. 18 Section 18. 628.347 (2) (bm) of the statutes is created to read:

SB572,7,21 628.347 (2) (bm) Except as permitted under par. (c), an insurer may not issue an annuity that is recommended by the insurer or its insurance intermediary to a consumer unless it is reasonable to believe that the annuity is suitable based on the consumer's suitability information.

SB572, s. 19 Section 19. 628.347 (2) (c) of the statutes is repealed and recreated to read:

SB572,7,25 628.347 (2) (c) 1. Subject to subd. 2., neither an insurance intermediary nor an insurer has any obligation to a consumer under par. (a) or (bm) related to any annuity transaction if any of the following applies:

SB572,8,2 a. Neither the insurance intermediary nor the insurer made a recommendation.

SB572,8,5 b. The insurance intermediary or insurer made a recommendation but the recommendation was later found to have been prepared based on inaccurate material information provided by the consumer.

SB572,8,7 c. The consumer refuses to provide relevant suitability information and the annuity transaction is not recommended.

SB572,8,9 d. The consumer decides to enter into an annuity transaction that is not based on a recommendation of the insurer or the insurance intermediary.

SB572, s. 20 Section 20. 628.347 (2) (d) of the statutes is renumbered 628.347 (2) (c) 2. and amended to read:

SB572,8,16 628.347 (2) (c) 2. Any recommendation of an insurer or insurance intermediary that, under par. (c), is not subject to the obligation under par. (a) An insurer's issuance of an annuity under circumstances specified in subd. 1. a. to d. shall be reasonable under all circumstances actually known to the insurer or insurance intermediary at the time the recommendation is made annuity is issued.

SB572, s. 21 Section 21. 628.347 (2) (dm) of the statutes is created to read:

SB572,8,19 628.347 (2) (dm) An insurance intermediary, or insurer if no intermediary is involved, shall at the time of sale do all of the following:

SB572,8,20 1. Make a record of any recommendation subject to par. (a).

SB572,8,22 2. Obtain a customer-signed statement documenting a customer's refusal, if any, to provide suitability information.

SB572,9,2 3. If a customer decides to enter into an annuity transaction that is not based on the insurance intermediary's or insurer's recommendation, obtain a customer-signed statement acknowledging that the annuity transaction is not recommended by the intermediary or insurer.

SB572, s. 22 Section 22. 628.347 (3) of the statutes is repealed and recreated to read:

SB572,9,7 628.347 (3) Insurer's supervisory responsibility. (a) An insurer shall establish a supervision system that is reasonably designed to achieve the insurer's and its insurance intermediaries' compliance with this section. Under the system, the insurer shall do at least all of the following:

SB572,9,10 1. Maintain reasonable procedures to inform its insurance intermediaries of the requirements of this section and incorporate the requirements of this section into relevant insurance intermediary training manuals.

SB572,9,13 2. Establish standards for insurance intermediary product training and maintain reasonable procedures to require its insurance intermediaries to comply with the requirements of sub. (4m).

SB572,9,15 3. Provide product-specific training and training materials that explain all material features of its annuity products to its insurance intermediaries.

SB572,9,23 4. Maintain procedures for review of each recommendation before issuance of an annuity that are designed to ensure that there is a reasonable basis to determine that a recommendation is suitable. An insurer's procedures may apply a screening system for the purpose of identifying selected transactions for additional review. An insurer's procedures may be accomplished electronically or through other means, including physical review. An electronic or other system may be designed to require additional review only of those transactions identified for additional review by the selection criteria.

SB572,9,25 5. Maintain reasonable procedures to detect recommendations that are not suitable, which may include confirmation of consumer suitability information, systematic customer surveys, interviews, confirmation letters, and programs of internal monitoring. Nothing in this subdivision prevents an insurer from complying with this subdivision by applying sampling procedures or by confirming suitability information after issuance or delivery of the annuity, or both.

SB572,10,8 6. Annually provide a report to senior management, including to the senior manager responsible for audit functions, that details a review, with appropriate testing, that is reasonably designed to determine the effectiveness of the supervision system, the exceptions found, and corrective action taken or recommended, if any.

SB572,10,14 (b) 1. Nothing in this subsection restricts an insurer from contracting for the performance of a function required par. (a), including maintenance of procedures. An insurer is responsible for taking appropriate corrective action and may be subject to, sanctions and penalties under subs. (5) and (6), regardless of whether the insurer contracts for the performance of a function and regardless of the insurer's compliance with subd. 2.

SB572,10,16 2. An insurer's supervision system under par. (a) shall include supervision of any contractual performance under this subsection, including all of the following:

SB572,10,18 a. Monitoring and, as appropriate, conducting audits to ensure that the contracted function is properly performed.

SB572,10,21 b. Annually obtaining a certification from a senior manager who has responsibility for the contracted function that the manager has a reasonable basis to represent, and does represent, that the function is properly performed.

SB572,10,24 (c) An insurer is not required to include in its system of supervision an insurance intermediary's recommendations to consumers of products other than the annuities offered by the insurer.

SB572, s. 23 Section 23. 628.347 (3m) of the statutes is created to read:

SB572,11,3 628.347 (3m) Prohibited acts of intermediary. An insurance intermediary may not dissuade, or attempt to dissuade, a consumer from doing any of the following:

SB572,11,5 (a) Truthfully responding to an insurer's request for confirmation of suitability information.

SB572,11,6 (b) Filing a complaint.

SB572,11,7 (c) Cooperating with the investigation of a complaint.

SB572, s. 24 Section 24. 628.347 (4) (title) of the statutes is repealed and recreated to read:

SB572,11,9 628.347 (4) (title) Financial Industry Regulatory Authority rules.

SB572, s. 25 Section 25. 628.347 (4) of the statutes is renumbered 628.347 (4) (a) and amended to read:

SB572,11,18 628.347 (4) (a) Compliance Subject to pars. (b) and (c), sales made in compliance with the National Association of Securities Dealers Conduct Rules FINRA requirements pertaining to suitability satisfies and supervision of annuity transactions satisfy the requirements under sub. (2) for the recommendation of variable annuities this section. Nothing in this subsection, however, limits the commissioner's ability to enforce this section, including conducting any investigation necessary for that enforcement.

SB572, s. 26 Section 26. 628.347 (4) (b) of the statutes is created to read:

SB572,11,20 628.347 (4) (b) For par. (a) to apply, an insurer must do all of the following:

SB572,11,22 1. Monitor the FINRA member broker-dealer using information collected in the normal course of an insurer's business.

SB572,11,25 2. Provide to the FINRA member broker-dealer information and reports that are reasonably appropriate to assist the FINRA member broker-dealer to maintain its supervision system.

SB572, s. 27 Section 27. 628.347 (4) (c) of the statutes is created to read:

SB572,12,4 628.347 (4) (c) This subsection applies to FINRA broker-dealer sales of variable annuities and fixed annuities if the suitability and supervision are similar to those applied to variable annuity sales.

SB572, s. 28 Section 28. 628.347 (4m) of the statutes is created to read:

SB572,12,11 628.347 (4m) Insurance intermediary training. (a) An insurance intermediary may not solicit the sale of an annuity product unless the insurance intermediary has adequate knowledge of the product to recommend the annuity and the insurance intermediary is in compliance with the insurer's standards for product training. An insurance intermediary may rely on insurer-provided product-specific training standards and materials to comply with this paragraph.

SB572,12,14 (b) 1. a. An insurance intermediary who engages in the sale of annuity products shall complete a one-time training course approved by the commissioner and provided by an education provider approved by the commissioner.

SB572,12,21 b. Insurance intermediaries who hold a life insurance line of authority on the effective date of this subd. 1. b. .... [LRB inserts date], and who desire to sell annuities must complete the requirements of this paragraph within 6 months after the effective date of this subd. 1. b. .... [LRB inserts date]. Individuals who obtain a life insurance line of authority on or after the effective date of this subd. 1. b. .... [LRB inserts date], may not engage in the sale of annuities until they have completed the annuity training course required under this paragraph.

SB572,12,23 2. The minimum length of the training required under this paragraph shall be sufficient to qualify for at least 4 continuing education credits, but may be longer.

SB572,12,25 3. The training required under this paragraph shall include information on all of the following topics:

SB572,13,1 a. The types of annuities and various classifications of annuities.

SB572,13,2 b. Identification of the parties to an annuity.

SB572,13,4 c. How fixed, variable, and indexed annuity contract provisions affect consumers.

SB572,13,5 d. The application of income taxation of qualified and non-qualified annuities.

SB572,13,6 e. The primary uses of annuities.

SB572,13,7 f. Appropriate sales practices and replacement and disclosure requirements.

SB572,13,12 4. Providers of annuity training courses intended to comply with this paragraph shall cover all of the topics listed under subd. 3. and may not present any marketing information or provide training on sales techniques or provide specific information about a particular insurer's products. Additional topics may be offered in conjunction with and in addition to those listed under subd. 3.

SB572,13,17 5. A provider of an annuity training course intended to comply with this paragraph shall register as a continuing education provider in this state and comply with the rules and guidelines applicable to insurance intermediary continuing education courses as set forth in rules of the office governing intermediary continuing education requirements.

SB572,13,20 6. Annuity training courses may be conducted and completed by classroom or self-study methods in accordance with rules of the office governing intermediary continuing education requirements.