Effective date note
NOTE: Section 628.347 (title) and sub. (1) are shown as affected eff. 5-1-11 by
2009 Wis. Act 343. Prior to 5-1-11 they read:
Effective date text
628.347 Suitability of annuity sales to consumers. (1) Definitions. In this section:
Effective date text
(a) "Annuity" means a fixed or variable annuity that is individually solicited, whether the product is classified as individual or group.
Effective date text
(b) "Recommendation" means advice provided by an insurance intermediary, or an insurer if no intermediary is involved, to an individual consumer that results in the purchase or exchange of an annuity in accordance with that advice.
628.347(2)
(2) Duties of insurers and insurance intermediaries with regard to recommendations and issuance of annuities. 628.347(2)(a)(a) In recommending to a consumer the purchase of an annuity, or the exchange of an annuity that results in an insurance transaction or series of insurance transactions, an insurance intermediary, or insurer 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:
628.347(2)(a)1.
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.
628.347(2)(a)2.
2. The consumer would benefit from certain features of the annuity, such as tax-deferred growth, annuitization, or death or living benefit.
628.347(2)(a)3.
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.
628.347(2)(a)4.
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:
628.347(2)(a)4.a.
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.
628.347(2)(a)4.b.
b. Whether the consumer would benefit from product enhancements and improvements.
628.347(2)(a)4.c.
c. Whether the consumer has had another annuity exchange or replacement and, in particular, an exchange or replacement within the preceding 36 months.
628.347(2)(b)
(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.
628.347(2)(bm)
(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.
628.347(2)(c)1.1. 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:
628.347(2)(c)1.a.
a. Neither the insurance intermediary nor the insurer made a recommendation.
628.347(2)(c)1.b.
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.
628.347(2)(c)1.c.
c. The consumer refuses to provide relevant suitability information and the annuity transaction is not recommended.
628.347(2)(c)1.d.
d. The consumer decides to enter into an annuity transaction that is not based on a recommendation of the insurer or the insurance intermediary.
628.347(2)(c)2.
2. 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 at the time the annuity is issued.
628.347(2)(dm)
(dm) An insurance intermediary, or insurer if no intermediary is involved, shall at the time of sale do all of the following:
628.347(2)(dm)2.
2. Obtain a customer-signed statement documenting a customer's refusal, if any, to provide suitability information.
628.347(2)(dm)3.
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.
Effective date note
NOTE: Sub. (2) is shown as affected eff. 5-1-11 by
2009 Wis. Act 343. Prior to 5-1-11 it reads:
Effective date text
(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 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 consumer on the basis of facts disclosed by the consumer as to his or her investments, other insurance products, and financial situation and needs.
Effective date text
(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:
Effective date text
1. The consumer's financial status.
Effective date text
2. The consumer's tax status.
Effective date text
3. The consumer's investment objectives.
Effective date text
4. Any other information that is reasonably appropriate for determining the suitability of a recommendation to the consumer.
Effective date text
(c) An insurance intermediary, or insurer if no intermediary is involved, has no obligation under par. (a) to a consumer related to a recommendation if the consumer does any of the following:
Effective date text
1. Refuses to provide relevant information requested by the insurer or insurance intermediary.
Effective date text
2. Fails to provide complete or accurate information.
Effective date text
3. Decides to enter into an insurance transaction that is not based on a recommendation of the insurer or insurance intermediary.
Effective date text
(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.
628.347(3)
(3) Insurer's supervisory responsibility. 628.347(3)(a)(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:
628.347(3)(a)1.
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.
628.347(3)(a)2.
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).
628.347(3)(a)3.
3. Provide product-specific training and training materials that explain all material features of its annuity products to its insurance intermediaries.
628.347(3)(a)4.
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.
628.347(3)(a)5.
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.
628.347(3)(a)6.
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.
628.347(3)(b)1.1. Nothing in this subsection restricts an insurer from contracting for the performance of a function required [under]
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.
628.347 Note
NOTE: A missing word is shown in brackets. Corrective legislation is pending.
628.347(3)(b)2.
2. An insurer's supervision system under
par. (a) shall include supervision of any contractual performance under this subsection, including all of the following:
628.347(3)(b)2.a.
a. Monitoring and, as appropriate, conducting audits to ensure that the contracted function is properly performed.
628.347(3)(b)2.b.
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.
628.347(3)(c)
(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.
Effective date note
NOTE: Sub. (3) is shown as repealed and recreated eff. 5-1-11 by
2009 Wis. Act 343. Prior to 5-1-11 it reads:
Effective date text
(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:
Effective date text
1. Maintaining written procedures.
Effective date text
2. Conducting periodic reviews of its records that are reasonably designed to assist in detecting and preventing violations of this section.
Effective date text
(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:
Effective date text
1. Maintaining written procedures.
Effective date text
2. Conducting periodic reviews of records that are reasonably designed to assist in detecting and preventing violations of this section.
Effective date text
(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.
Effective date text
(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:
Effective date text
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.
Effective date text
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.
Effective date text
(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.
Effective date text
(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:
Effective date text
1. Review, or provide for the review of, all insurance intermediary solicited transactions.
Effective date text
2. Include in its system of supervision an insurance intermediary's recommendations made to consumers of products other than annuities offered by the insurer, general agent, or independent agency.
Effective date text
(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.
Effective date text
(h) No person may provide a representation under par. (d) 1. unless the person satisfies all of the following:
Effective date text
1. The person is a senior manager with responsibility for the delegated functions.
Effective date text
2. The person has a reasonable basis for making the representation.
628.347(3m)
(3m) Prohibited acts of intermediary. An insurance intermediary may not dissuade, or attempt to dissuade, a consumer from doing any of the following:
628.347(3m)(a)
(a) Truthfully responding to an insurer's request for confirmation of suitability information.
628.347(4)
(4) Financial Industry Regulatory Authority rules. 628.347(4)(a)(a) Subject to
pars. (b) and
(c), sales made in compliance with FINRA requirements pertaining to suitability and supervision of annuity transactions satisfy the requirements under this section. Nothing in this subsection, however, limits the commissioner's ability to enforce this section, including conducting any investigation necessary for that enforcement.
628.347(4)(b)
(b) For
par. (a) to apply, an insurer must do all of the following:
628.347(4)(b)1.
1. Monitor the FINRA member broker-dealer using information collected in the normal course of an insurer's business.
628.347(4)(b)2.
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.
628.347(4)(c)
(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.
Effective date note
NOTE: Sub. (4) is shown as affected eff. 5-1-11 by
2009 Wis. Act 343. Prior to 5-1-11 it reads:
Effective date text
(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.
