in-20240306-IR-760230518FRA: Amends and adds provisions to 760 IAC 1-72 concerning suitability in annuity transactions to: require insurance producers to act in the best interest of the consumer when making a recommendation of an annuity; provide that the best interest requirements are satisfied when an insurance producer complies with specific obligations relating to care, disclosure, conflict of interest, and documentation; require insurers to establish, maintain, and use a system to supervise recommendations for annuities; mandate additional training for producers selling annuities; and require an insurer to provide a buyer's guide to consumers purchasing an annuity. Repeals 760 IAC 1-72-4. Effective July 1, 2024.

Final Rule LSA Document #23-518 DIGEST Sec. 1. (a) The purpose of this rule is to set forth standards and procedures for recommendations to consumers that result in a transaction involving annuity products require producers, as defined in this rule, to act in the best interest of the consumer when making a recommendation of an annuity, and to require insurers to establish and maintain a system to supervise recommendations so that the insurance needs and financial objectives of consumers at the time of the transaction are appropriately effectively addressed. (b) This rule shall apply to any sale or recommendation to purchase or exchange of an annuity. made to a consumer by an insurance producer, or an insurer where no producer is involved, that results in the purchase or exchange recommended. (c) Nothing in this rule shall be construed to create or imply a private cause of action for a violation of this rule, or to subject a producer to civil liability under the best interest standard of care outlined in section 4.1 of this rule or under standards governing the conduct of a fiduciary or a fiduciary relationship. Sec. 2. Unless otherwise specifically included, this rule shall not apply to recommendations transactions involving the following: Sec. 3. The following definitions apply throughout this rule: Sec. 4.1. (a) A producer, when making a recommendation of an annuity, shall act in the best interest of the consumer under the circumstances known at the time the recommendation is made, without placing the producer's or the insurer's financial interest ahead of the consumer's interest. A producer has acted in the best interest of the consumer if they have satisfied the obligations set forth in subsections (b) through (m) regarding care, disclosure, conflict of interest, and documentation. The requirements under this subsection and subsections (b) through (m) do not create a fiduciary obligation or relationship, and only create a regulatory obligation as established in this rule. (b) The producer, in making a recommendation, shall exercise reasonable diligence, care, and skill to: (c) The requirements under subsection (b) require a producer to: (d) The requirements under subsection (b) do not mean: (e) The consumer profile information, characteristics of the insurer, and product costs, rates, benefits, and features are those factors generally relevant in making a determination whether an annuity effectively addresses the consumer's financial situation, insurance needs, and financial objectives, but the level of importance of each factor under the care obligation of this subsection may vary depending on the facts and circumstances of a particular case. However, each factor may not be considered in isolation. (f) In the case of an exchange or replacement of an annuity, the producer shall consider the whole transaction, which includes taking into consideration whether: (g) Nothing in this rule shall be construed to require a producer to obtain a license other than a producer license with the appropriate line of authority to sell, solicit, or negotiate insurance in this state, including, but not limited to, a securities license, in order to fulfill the duties and obligations contained in this regulation; provided the producer does not give advice or provide services that are otherwise subject to securities laws or engage in any other activity requiring other professional licenses. (h) Prior to the recommendation or sale of an annuity, the producer shall prominently disclose the following to the consumer on a form substantially similar to the form set forth in section 7 of this rule: (i) Upon request of the consumer or the consumer's designated representative, the producer shall disclose: (j) Prior to or at the time of the recommendation or sale of an annuity, the producer shall have a reasonable basis to believe the consumer has been informed of various features of the annuity, such as: (k) A producer shall identify and avoid, or reasonably manage and disclose, material conflicts of interest, including material conflicts of interest related to an ownership interest. (l) A producer shall, at the time of recommendation or sale: (m) A requirement applicable to a producer under this section shall apply to each producer that has exercised material control or influence in the making of a recommendation and has received direct compensation as a result of the recommendation or sale, regardless of whether the producer has had direct contact with a consumer. Activities, such as providing or delivering marketing or educational materials, product wholesaling, or other back office product support, and general supervision of a producer do not, in and of themselves, constitute material control or influence. (n) Transactions not based on a recommendation are subject to the following: (o) Except as permitted under subsection (n), an insurer may not issue an annuity recommended to a consumer unless there is a reasonable basis to believe the annuity would effectively address the particular consumer's financial situation, insurance needs, and financial objectives based on the consumer's consumer profile information and the following: (p) Neither a producer nor an insurer shall dissuade, or attempt to dissuade, a consumer from: (q) The following safe harbor provisions apply with respect to sales of annuities subject to this rule: Sec. 4.5. (a) A producer shall not solicit the sale of an annuity product unless the producer has adequate knowledge of the product to recommend the annuity and the producer is in compliance with the insurer's standards for product training. A producer may rely on insurer provided, product-specific training standards and materials to comply with this section. (b) A producer that engages in the sale of annuity products shall complete a one (1) time four (4) credit training course approved by the department and provided by a continuing education provider. (c) Producers that hold a life insurance line of authority on July 1, 2024, and desire to sell annuities shall complete the requirements of subsection (b) within six (6) months after the effective date of this rule. Individuals who obtain a life insurance line of authority on or after the effective date of this rule may not engage in the sale of annuities until the annuity training course required under subsection (b) has been completed. (d) The minimum length of the training required under subsection (b) is sufficient to qualify for at least four (4) CE credits, but may be longer. (e) The training required under this subsection shall include information on the following topics: (f) Providers of courses intended to comply with this section shall cover all topics listed in subsection (e), and shall not present any marketing information or provide training on sales techniques or specific information about a particular insurer's products. Additional topics may be offered in conjunction with and in addition to the topics listed in subsection (e). (g) A provider of an annuity training course intended to comply with this subsection shall register as a CE provider and comply with the rules and guidelines applicable to producer continuing education courses as set forth in IC 27-1-15.7-4. (h) A producer that has completed an annuity training course approved by the department prior to July 1, 2024, shall, within six (6) months after July 1, 2024, complete either: (i) Annuity training courses may be conducted and completed by classroom or self-study methods in accordance with IC 27-1-15.6-19.5(b)(4). (j) Providers of annuity training shall comply with the reporting requirements and shall issue certificates of completion in accordance with IC 27-1-15.7-4. (k) The satisfaction of the training requirements of another state that are substantially similar to the provisions of this section are deemed to satisfy the training requirements of this section. (l) The satisfaction of the components of the training requirements of a course or courses with components substantially similar to the provisions of this section are deemed to satisfy the training requirements of this section. (m) An insurer shall verify that a producer has completed the annuity training course required under this section before allowing the producer to sell an annuity product for that insurer. An insurer may satisfy its responsibility under this subsection by obtaining certificates of completion of the training course or obtaining reports provided by commissioner-sponsored database systems or vendors, or from a reasonably reliable commercial database vendor that has a reporting arrangement with approved CE providers. Sec. 5. (a) An insurer is responsible for compliance with this rule. If a violation occurs, either because of the action or inaction of the insurer or its producer, the commissioner may order the following: (b) Any An applicable penalty under IC 27-4-1-4 for a violation of this rule may be reduced or eliminated, with the approval of the commissioner, of the department of insurance, if corrective action for the consumer was taken promptly after a violation was discovered. (c) The authority to enforce compliance with this rule is vested exclusively with the commissioner. Sec. 6. (a) Insurers, managing general agents, independent agencies, and insurance producers shall: (b) Records required to be maintained by this rule may be are maintained: Sec. 7. The insurance agent (producer) disclosure for annuities form is as follows: 760230351PRA1.jpg 760230351PRA2.jpg Sec. 8. The consumer refusal to provide information form is as follows: CONSUMER REFUSAL TO PROVIDE INFORMATION Do Not Sign Unless You Have Read and Understand the Information in this Form Sec. 9. The consumer decision to purchase an annuity not based on a recommendation form is as follows: Consumer Decision to Purchase an Annuity NOT Based on a Recommendation Do Not Sign This Form Unless You Have Read and Understand It.