Alabama Administrative Code › Title 482 - ALABAMA DEPARTMENT OF INSURANCE › Chapter 482-1-137 - SUITABILITY PROTECTION IN ANNUITY TRANSACTIONS › Section 482-1-137-.06 - Duties Of Insurers And Producers

Current through Register Vol. 42, No. 9, June 28, 2024
(1) Best Interest Obligations. 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 following obligations regarding care,
			 disclosure, conflict of interest, and documentation:
(a)
1. Care
			 Obligation. The producer, in making a recommendation, shall exercise reasonable
			 diligence, care, and skill to accomplish all of the following:
(i) Know the consumer's financial situation,
			 insurance needs, and financial objectives.
(ii) Understand the available recommendation
			 options after making a reasonable inquiry into options available to the
			 producer.
(iii) Have a reasonable
			 basis to believe the recommended option effectively addresses the consumer's
			 financial situation, insurance needs, and financial objective over the life of
			 the product, as evaluated in light of the consumer profile
			 information.
(iv) Communicate the
			 basis or bases of the recommendation.
2. The
			 requirements of subparagraph 1. include making reasonable efforts to obtain
			 consumer profile information from the consumer prior to the recommendation of
			 an annuity.
3. The requirements of
			 subparagraph 1. require a producer to consider types of products the producer
			 is authorized and licensed to recommend or sell that address the consumer's
			 financial situation, insurance needs and: financial objectives. This does not
			 require analysis or consideration of any products outside the authority and
			 license of the producer or other possible alternative products or strategies
			 available in the market at the time of the recommendation. Producers shall be
			 held to standards applicable to producers with similar authority and
			 licensure.
4. The requirements
			 under this paragraph (1) do not create a fiduciary obligation or relationship
			 and only create a regulatory obligation as established in this
			 chapter.
5. 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 subparagraph (a) may vary depending on
			 the facts and circumstances of a particular case. However, each factor may not
			 be considered in isolation.
6. The
			 requirements under subparagraph 1. include having a reasonable basis to believe
			 the consumer would benefit from certain features of the annuity, such as
			 annuitization, death or living benefit or other insurance-related
			 features.
7. The requirements under
			 subparagraph 1. apply to the particular annuity as a whole and the underlying
			 subaccounts to which funds are allocated at the time of purchase or exchange of
			 an annuity, and riders and similar product enhancements, if any.
8. The requirements under subparagraph 1. do
			 not mean the annuity with the lowest one-time or multiple occurrence
			 compensation structure shall necessarily be recommended.
9. The requirements under subparagraph 1. do
			 not mean the producer has ongoing monitoring obligations under the care
			 obligation under this subparagraph (a), although such an obligation may be
			 separately owed under the terms of a fiduciary, consulting, investment advising
			 or financial planning agreement between the consumer and the
			 producer.
10. In the case of an
			 exchange or replacement of an annuity, the producer shall consider the whole
			 transaction, which includes taking into consideration whether:
(i) 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.
(ii) The
			 replacing product would substantially benefit the consumer in comparison to the
			 replaced product over the life of the product.
(iii) The consumer has had another annuity
			 exchange or replacement and, in particular, an exchange or replacement within
			 the preceding 60 months.
11. Nothing in this chapter should be
			 construed to require a producer to obtain any 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 any securities license,
			 in order to fulfill the duties and obligations contained in this chapter;
			 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.