October 25, 2021 - Introduced by Representatives Petersen, Magnafici, Dittrich,
Doyle, Allen, Macco, Hesselbein, Tusler and Petryk, cosponsored by
Senators Stafsholt, Feyen and Ballweg. Referred to Committee on
Insurance.

AB654,1,8 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.

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.

AB654,3,84 628.347 (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.