Chapter 2 — Annuity Suitability & Life Advertising

Life insurance and annuity contracts require ads to be clear, truthful, and provide adequate disclosure of the benefits, limitations, and exclusions of policies sold as life insurance and annuity contracts. Guidelines and standards are established to assure product descriptions are presented in a manner that prevents unfair, deceptive, and misleading advertising. [Chapter 69B-150]

• An ad that is an invitation to contract must disclose those exceptions, reductions, and limitations affecting the basic provisions of the policy
• An ad must disclose the existence of any waiting, elimination, probationary, or similar time period between the effective date of the policy and the effective date of coverage, or the existence of a time period between the date a loss occurs and the date benefits begin to accrue

A licensee must keep and make available to the department books, accounts, and records to enable the department to determine whether the licensee is complying with advertising provisions. Every licensee must preserve books, accounts, and records pertaining to a premium payment for at least three years after payment. Preservation of records by computer, photocopies, or other electronic means constitutes compliance with this requirement.

The 3-year requirement does not apply to insurance binders when no policy is ultimately issued and no premium is collected. [Source: §626.561(2)]

The purpose of this section is to require insurers to set forth standards and procedures for making recommendations to consumers which result in transactions involving annuity products, and to establish a system for supervising such recommendations to ensure that the insurance needs and financial objectives of consumers are appropriately addressed at the time of the transaction. [Source: §627.4554(1)]

In recommending the purchase or exchange of an annuity to a consumer, an insurance agent or insurer must have an objectively reasonable basis for believing the recommendation is suitable for the consumer based on the facts disclosed by the consumer as to his or her investments, other insurance products, financial situation, and needs.

Before executing a purchase or exchange of an annuity, an insurance agent or insurer must make reasonable efforts to obtain the consumer’s suitability information on a form of the department, completed and signed by the applicant and agent. Questions must be presented in at least 12-point type. A true and correct executed copy must be provided to the insurer within 10 days after execution and to the consumer no later than the date of delivery of the contract.

An insurer may not issue an annuity recommended to a consumer unless there is a reasonable basis to believe the annuity is suitable. However, an insurer or its agent has no obligation to a consumer related to an annuity transaction if:

• A recommendation has not been made
• A recommendation was made and is later found to have been based on materially inaccurate information provided by the consumer
• A consumer refuses to provide relevant suitability information and the annuity transaction is not recommended
• A consumer decides to enter into an annuity transaction that is not based on a recommendation of an insurer or its agent

• Make a record of any recommendation made
• Obtain the consumer’s signed statement documenting his or her refusal to provide suitability information (if applicable)
• Obtain the consumer’s signed statement acknowledging that an annuity transaction is not recommended, if the consumer decides to enter into a transaction not based on a recommendation

An insurer must ensure that a system to supervise recommendations is established and maintained by:

• Maintaining written procedures
• Establishing agent training including product-specific training
• Maintaining procedures for the review of each recommendation before issuance of an annuity
• Annually providing a report to senior managers conducting reviews of its records reasonably designed to assist in detecting and preventing violations

Sales made in compliance with FINRA requirements pertaining to the suitability and supervision of annuity transactions satisfy the requirements of this section.

An agent or insurer has no obligation to a consumer related to any annuity recommendation if the consumer is covered under any of the following:

• An employee pension or welfare benefit plan covered by the federal Employee Retirement and Income Security Act (ERISA)
• A plan described by s. 401(a), s. 401(k), s. 403(b), s. 408(k), or s. 408(p) of the Internal Revenue Code, if established or maintained by an employer
• A government or church plan defined in s. 414 of the Internal Revenue Code, or a deferred compensation plan of a state or local government or tax-exempt organization under s. 457 of the Internal Revenue Code
• A nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor
• Settlements or assumptions of liabilities associated with personal injury litigation or a dispute or claim-resolution process
• Formal prepaid funeral contracts

Insurers and agents must maintain or be able to make available to the office or department records of the information collected from the consumer and other information used in making the recommendations that were the basis for insurance transactions for 5 years after the insurance transaction is completed by the insurer. An insurer may maintain the documentation on behalf of its agent.

Records may be maintained in paper, photographic, microprocess, magnetic, mechanical, or electronic media, or by any process that accurately reproduces the actual document. [§627.4554(6)]

An insurer is responsible for compliance with this section. If a violation occurs because of the action or inaction of the insurer or its agent which results in harm to a consumer, the office may order the insurer to take reasonably appropriate corrective action for the consumer and may impose appropriate penalties and sanctions.

The department may order:

• An insurance agent to take reasonably appropriate corrective action for a consumer harmed by a violation, including monetary restitution of penalties or fees incurred by the consumer
• A managing general agency or insurance agency that employs or contracts with an insurance agent to sell or solicit the sale of annuities to consumers to take reasonably appropriate corrective action for a consumer harmed by a violation

The department can, in addition to any other penalty authorized, order an insurance agent to pay restitution to any senior consumer who has been deprived of money by the agent’s misappropriation, conversion, or unlawful withholding of money. The amount of restitution cannot exceed the amount misappropriated, converted, or unlawfully withheld.

Any applicable penalty under the Florida Insurance Code may be reduced or eliminated, according to a schedule adopted by the office or the department, if corrective action for the senior was taken promptly after a violation was discovered. [Source: §627.4554(7)]

This does not apply to annuities purchased by an accredited investor or to IRS-specified annuities referenced above. [Source: §627.4554(8)]