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LRB-4097/1
EKL&TJD:cdc
2021 - 2022 LEGISLATURE
October 20, 2021 - Introduced by Senators Stafsholt, Feyen and Ballweg,
cosponsored by Representatives Petersen, Magnafici, Dittrich, Doyle,
Allen and Petryk. Referred to Committee on Insurance, Licensing and
Forestry.
SB644,1,8 1An Act to renumber and amend 628.347 (1) (e); to amend 628.347 (title),
2628.347 (1) (b), 628.347 (3) (a) 4., 628.347 (3) (a) 5., 628.347 (3) (c), 628.347 (3m)
3(a) and 628.347 (4m) (b) 3. f.; to repeal and recreate 628.347 (2) and 628.347
4(4); and to create 628.347 (1) (ac), 628.347 (1) (ae), 628.347 (1) (ag) 13. and 14.,
5628.347 (1) (ak), 628.347 (1) (ar), 628.347 (1) (aw), 628.347 (1) (ax), 628.347 (2b),
6628.347 (2c), 628.347 (2d), 628.347 (2e), 628.347 (3) (a) 7., 8. and 9., 628.347 (3)
7(am), 628.347 (4m) (b) 10., 628.347 (4m) (b) 11. and 628.347 (9) and (10) of the
8statutes; relating to: best interest in annuity transactions.
Analysis by the Legislative Reference Bureau
Under current law, before an insurance agent, or insurer if no agent is involved,
can advise a prospective buyer to buy an annuity product, the agent or insurer must
have reasonable grounds to believe that the recommendation is not unsuitable for
the buyer. This bill modifies the existing suitability requirement based on a model
regulation of the National Association of Insurance Commissioners.
Under the bill, rather than using the suitability framework provided under
current law, an insurance agent must act in the best interest of the consumer under
the circumstances known at the time the recommendation is made, without placing
the financial interest of the agent or insurer ahead of the consumer's interest. The

bill provides that an agent acts in the consumer's best interest if the agent satisfies
obligations regarding care, disclosure, conflict of interest, and documentation.
Under the bill's care obligation, the agent must exercise reasonable diligence,
care, and skill in making a recommendation, which includes knowing the consumer's
financial situation, insurance needs, and financial objectives, understanding the
available options, having a reasonable basis to believe the recommended option
effectively addresses the consumer's financial situation, insurance needs, and
financial objectives, and communicating the basis of the recommendation to the
consumer. The bill requires the agent to have a reasonable basis to believe the
consumer will benefit from the annuity's features, make reasonable efforts to obtain
the consumer's profile information, and consider the types of products the agent is
authorized and licensed to recommend or sell that address the consumer's financial
situation, insurance needs, and financial objectives.
Under the bill's disclosure obligation, the agent must, prior to the
recommendation or sale, prominently disclose to the consumer a description of the
agent's relationship with the consumer and role in the transaction, a statement on
whether the agent is licensed and authorized to sell annuities and other products,
a statement describing the insurers for which the agent is authorized to sell
products, a description of the cash and noncash compensation to be received by the
agent, and notice of the consumer's right to request additional information regarding
cash compensation. The bill also requires that the agent disclose, upon request of
the consumer or designee, a reasonable estimate of the amount of cash compensation
to be received and whether the compensation is a one-time or multiple occurrence
amount. Additionally, the bill requires that the agent, prior to or at the time of the
recommendation or sale, have a reasonable basis to believe that the consumer has
been informed of various features of the annuity.
Under the bill's conflict of interest obligation, the agent must identify and avoid
or reasonably manage and disclose material conflicts of interest, including material
conflicts related to an ownership interest.
Under the bill's documentation obligation, the agent must, at the time of
making a recommendation or sale, make a written record of any recommendation
and the basis for it, obtain a signed statement from the consumer regarding the
failure to provide profile information, and obtain a signed statement from the
consumer that acknowledges an annuity transaction is not recommended if the
consumer decides to enter into a transaction that is not based on the agent's
recommendation.
The bill also provides that an insurer may not issue an annuity recommended
to a consumer unless there is a reasonable basis to believe the annuity will effectively
address the consumer's financial situation, insurance needs, and financial objectives
based on the consumer's profile information. The bill also requires that insurers
establish and maintain reasonable procedures to assess whether agents have
provided consumers with the information required to be provided under the bill, to
identify and address suspicious refusals by consumers to provide profile information,
and to identify and eliminate contests, quotas, bonuses, and noncash compensation
that are based on the sales of specific annuities within a limited time period.

The bill provides that recommendations and sales of annuities made in
compliance with comparable standards, such as those under federal and state
securities laws, satisfy the bill's requirements if the insurer satisfies certain
conditions. Under current law, this standard is limited to requirements of the
Financial Industry Regulatory Authority pertaining to suitability and supervision
of annuity transactions.
Under the bill, insurance agents are required to, within six months of the bill's
effective date, take a four credit training course approved by the commissioner of
insurance or an additional one credit course provided by an education provider that
is approved by the commissioner.
These provisions do not create or imply a private cause of action for a violation
of the requirements or subject an insurance intermediary or insurer to civil liability
under the best interest standard of care or fiduciary standards. The provisions also
do not require an insurance intermediary to obtain any additional licensure.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
SB644,1 1Section 1 . 628.347 (title) of the statutes is amended to read:
SB644,3,2 2628.347 (title) Suitability Best interest in annuity transactions.
SB644,2 3Section 2 . 628.347 (1) (ac) of the statutes is created to read:
SB644,3,84 628.347 (1) (ac) “Cash compensation” means any discount, concession, fee,
5service fee, commission, sales charge, loan, override, or cash benefit received in
6connection with the recommendation or sale of an annuity by an insurance
7intermediary from an insurer or other insurance intermediary or directly from the
8consumer.
SB644,3 9Section 3 . 628.347 (1) (ae) of the statutes is created to read:
SB644,3,1010 628.347 (1) (ae) “Comparable standards” means:
SB644,4,211 1. With respect to broker-dealers and registered representatives of
12broker-dealers, the applicable rules of the federal securities and exchange
13commission and FINRA pertaining to best interest obligations and supervision of

1annuity recommendations and sales, including Regulation Best Interest and any
2amendments or successor regulations thereto.
SB644,4,83 2. With respect to investment advisers registered under federal or state
4securities law and investment adviser representatives, the fiduciary duties and
5other requirements imposed on the investment adviser or investment adviser
6representative by contract or under the Investment Advisers Act of 1940 or
7applicable state securities law, including the federal form ADV and applicable
8interpretations.
SB644,4,129 3. With respect to plan fiduciaries and fiduciaries described in par. (ak) 3., the
10duties, obligations, prohibitions, and other requirements attendant to such status
11under the Employee Retirement Income Security Act of 1974 or the Internal Revenue
12Code.
SB644,4 13Section 4 . 628.347 (1) (ag) 13. and 14. of the statutes are created to read:
SB644,4,1414 628.347 (1) (ag) 13. Insurance needs.
SB644,4,1515 14. Financial resources used to fund the annuity.
SB644,5 16Section 5 . 628.347 (1) (ak) of the statutes is created to read:
SB644,4,1817 628.347 (1) (ak) “Financial professional” means an insurance intermediary
18who is regulated and acting as any of the following:
SB644,4,2019 1. A broker-dealer registered under federal or state securities law or a
20registered representative of such a broker-dealer.
SB644,4,2221 2. An investment adviser registered under federal or state securities law or an
22investment adviser representative associated with such an investment adviser.
SB644,4,24233. A plan fiduciary, as defined in 29 USC 1002 (21), or a fiduciary, as defined
24in section 4975 (e) (3) of the Internal Revenue Code.
SB644,6 25Section 6 . 628.347 (1) (ar) of the statutes is created to read:
SB644,5,4
1628.347 (1) (ar) “Material conflict of interest” means a financial interest of an
2insurance intermediary in the sale of an annuity that a reasonable person would
3expect to influence the impartiality of a recommendation, but does not include cash
4compensation or noncash compensation.
SB644,7 5Section 7 . 628.347 (1) (aw) of the statutes is created to read:
SB644,5,86 628.347 (1) (aw) “Noncash compensation” means any form of compensation
7that is not cash compensation, including health insurance, office rent, office support,
8and retirement benefits.
SB644,8 9Section 8 . 628.347 (1) (ax) of the statutes is created to read:
SB644,5,1510 628.347 (1) (ax) “Non-guaranteed elements” means the premiums, credited
11interest rates, benefits, values, dividends, noninterest based credits, and charges,
12along with the elements of formulas used to determine any of these items, that are
13subject to company discretion and are not guaranteed at issue. An element is a
14non-guaranteed element if any non-guaranteed elements are used in its calculation.
15For purposes of this subsection, credited interest rates include any bonus.
SB644,9 16Section 9 . 628.347 (1) (b) of the statutes is amended to read:
SB644,5,2317 628.347 (1) (b) “Recommendation" means advice provided by an insurance
18intermediary, or an insurer if no intermediary is involved, to an individual consumer
19that results in, or was intended to result in, the purchase, exchange, or replacement
20of an annuity in accordance with that advice, except that “recommendation” does not
21include general communication to the public, generalized customer service
22assistance or administrative support, general educational information and tools,
23prospectuses, and other product and sales materials
.
SB644,10 24Section 10. 628.347 (1) (e) of the statutes is renumbered 628.347 (1) (ag), and
25628.347 (1) (ag) (intro.), 3., 8. and 11., as renumbered, are amended to read:
SB644,6,4
1628.347 (1) (ag) (intro.) “Suitability Consumer profile information" means
2information that is reasonably appropriate to determine the suitability of whether
3a recommendation addresses the consumer's financial situation, insurance needs,
4and financial objectives
, including all of the following:
SB644,6,65 3. Financial situation and needs, including the financial resources used for the
6funding of the annuity
debts and other obligations.
SB644,6,87 8. Existing assets and financial products, including investment, annuity, and
8life insurance holdings.
SB644,6,109 11. Risk tolerance, including willingness to accept non-guaranteed elements
10in the annuity
.
SB644,11 11Section 11 . 628.347 (2) of the statutes is repealed and recreated to read:
SB644,6,2112 628.347 (2) Best interest obligations. (a) When making a recommendation
13of an annuity, an insurance intermediary shall act in the best interest of the
14consumer under the circumstances known at the time the recommendation is made,
15without placing the financial interest of the intermediary or insurer ahead of the
16consumer's interest. An insurance intermediary has acted in the best interest of the
17consumer if the intermediary has satisfied the care obligation under sub. (2b), the
18disclosure obligation under sub. (2c), the conflict of interest obligation under sub.
19(2d), and the documentation obligation under sub. (2e). The requirements under this
20subsection and subs. (2b) to (2e) create only a regulatory obligation and do not create
21a fiduciary obligation or relationship.
SB644,7,422 (b) Any requirement applicable to an insurance intermediary under this
23subsection shall apply to every insurance intermediary who exercises material
24control or influence in the making of a recommendation and has received direct
25compensation as a result of the recommendation or sale, regardless of whether the

1intermediary has any direct contact with the consumer. Activities such as providing
2or delivering marketing or educational materials, product wholesaling or other back
3office product support, and conducting general supervision of an insurance
4intermediary do not, in and of themselves, constitute material control or influence.
SB644,12 5Section 12. 628.347 (2b) of the statutes is created to read:
SB644,7,86 628.347 (2b) Care obligation. (a) In making a recommendation, an insurance
7intermediary shall exercise reasonable diligence, care, and skill to do all of the
8following:
SB644,7,109 1. Know the consumer's financial situation, insurance needs, and financial
10objectives.
SB644,7,1211 2. Understand the available recommendation options after making a
12reasonable inquiry into the options available to the intermediary.
SB644,7,1613 3. Have a reasonable basis to believe the recommended option effectively
14addresses the consumer's financial situation, insurance needs, and financial
15objectives over the life of the product, as evaluated in light of the consumer profile
16information.
SB644,7,1717 4. Communicate the basis or bases of the recommendation to the consumer.
SB644,7,1918 (b) The requirements imposed on an insurance intermediary under par. (a)
19include all of the following:
SB644,7,2220 1. Having a reasonable basis to believe the consumer would benefit from
21certain features of the annuity, such as tax-deferred growth, annuitization, a death
22or living benefit, or other insurance-related features.
SB644,7,2423 2. Making reasonable efforts to obtain consumer profile information from the
24consumer prior to the recommendation.
SB644,8,8
13. Considering the types of products the intermediary is authorized and
2licensed to recommend or sell that address the consumer's financial situation,
3insurance needs, and financial objectives. Nothing in this subdivision requires
4analysis or consideration of products outside the authority and license of the
5intermediary or other possible alternative products or strategies available in the
6market at the time of the recommendation. Under this subdivision, an intermediary
7shall be held to standards applicable to intermediaries with similar authority and
8licensure.
SB644,8,129 (be) If consumer profile information is obtained by an insurance intermediary,
10the insurance intermediary may not conceal the information from the insurer, and
11an insurance intermediary may not otherwise dissuade or attempt to dissuade the
12consumer from providing the information.
SB644,8,1613 (c) The requirements under this subsection shall apply to the annuity as a
14whole, the underlying subaccounts to which funds are allocated at the time of
15purchase or exchange of the annuity, and any riders and similar product
16enhancements.
SB644,8,2217 (d) The factors generally relevant in determining under this subsection
18whether an annuity effectively addresses the consumer's financial situation,
19insurance needs, and financial objectives shall be the consumer profile information,
20characteristics of the insurer, and product costs, rates, benefits and features. The
21level of importance of each factor may vary depending on the facts and circumstances
22of a particular case, and no factor may be considered in isolation.
SB644,8,2423 (e) Nothing in this subsection requires that an annuity with the lowest
24one-time or multiple occurrence compensation structure be recommended.
SB644,9,4
1(f) Nothing in this subsection requires that the insurance intermediary have
2an ongoing monitoring obligation, although such obligation may be separately owed
3under the terms of a fiduciary, consulting, investment advising, or financial planning
4agreement between the consumer and intermediary.
SB644,9,75 (g) In the case of an exchange or replacement of an annuity, the insurance
6intermediary shall consider the whole transaction, which includes taking into
7consideration all of the following:
SB644,9,118 1. Whether the consumer will incur a surrender charge, be subject to the
9commencement of a new surrender period, lose existing benefits, including death,
10living, or other contractual benefits, or be subject to increased fees, investment
11advisory fees, or charges for riders and similar product enhancements.
SB644,9,1312 2. Whether the replacing product would substantially benefit the consumer in
13comparison to the replaced product over the life of the product.
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