Chapter 6 — Disclosure & Agent Responsibilities (continued)

Beyond the Best Interest standard and its disclosure and supervision requirements, Florida’s Insurance Code contains a number of other important provisions that protect the general insurance-buying public. Many of these were originally enacted or strengthened by the 2008 Seibel Act and remain in force. They apply to annuity sales broadly, not just to senior consumers.

Sales of life insurance policies require the delivery of standard disclosure documents: the Buyer’s Guide and a Policy Summary, drawn up in accordance with NAIC guidelines. For annuities, the analogous documents are a Buyer’s Guide and a Contract Summary.

Florida law requires a Buyer’s Guide and Contract Summary for the sale of all annuity contracts — fixed, variable, and indexed. Sales of variable annuities must still be accompanied by a prospectus as a federal securities disclosure requirement. The Buyer’s Guide and Contract Summary are in addition to, not a substitute for, the prospectus.

Florida law provides purchasers of annuity contracts a “Free Look” period — an opportunity to review the terms of the contract and, if they choose, to return it within the free look window for a full refund of premiums paid.

Prior to the 2008 Seibel Act, state law mandated a 10-day Free Look period for all life insurance products and fixed annuity contracts. The Seibel Act extended the Free Look period to 14 days and broadened the provision to include variable annuities as well as fixed annuities.

Issuers can avoid the free look refund provision by giving the prospective purchaser a Buyer’s Guide and Contract Summary ten days prior to purchase. If these documents are delivered at the time of purchase — as they usually are — the contract must include the 14-day refund provision.

Florida law prohibits both twisting and churning. Both practices rely on misrepresentations and are considered unethical and illegal:

• Twisting — The replacement of one insurance product for another issued by a different company, based on false or misleading information, with the agent’s intent to earn a commission.
• Churning (also called “internal twisting”) — The client is induced to exchange one company’s product for another product issued by that same company.
• Stripping — A related prohibited practice in which the cash value of one insurance product is used to finance the purchase of another insurance product, based on misrepresentations.

Florida law also prohibits indirect churning. This occurs when a policy is surrendered and the resulting funds are used to purchase an immediate annuity (specifying payments to begin at once), which is then used to fund a deferred annuity or a life insurance policy. Indirect churning is prohibited because it allows the agent to receive a double commission: one on the immediate annuity and another on the deferred annuity or life insurance policy that the immediate annuity funds.

One commonly used type of insurance fraud involves forged signatures on applications and other documents. Florida law makes it a third-degree felony to willfully submit to an insurer an insurance application or policy-related document on behalf of a consumer that contains a false or fraudulent signature.

This applies to all policy-related documents — applications, suitability questionnaires, Consumer Profile Information forms, replacement comparison forms, beneficiary designations, and any other documents required under Florida’s Insurance Code. Given that the Best Interest standard now requires consumers to sign multiple forms (Appendices A, B, and C), the importance of obtaining genuine consumer signatures on all required documents cannot be overstated.

Another type of misrepresentation occurs when agents use credentials or titles to mislead prospects into thinking the agent is more experienced or knowledgeable than is actually the case. Some organizations, for a fee, simply issue credentials and official-looking designations to bolster an agent’s résumé without requiring meaningful training or examination.

Florida law prohibits agents from using designations or misrepresenting their qualifications in the following ways:

• Using designations or titles that falsely imply the agent has special financial knowledge, has obtained specialized financial training, or is certified or qualified to provide specialized financial advice to senior citizens
• Using terms such as “financial advisor” to falsely imply the agent is licensed or qualified to discuss, sell, or recommend financial products other than insurance products
• Falsely implying the agent is qualified to discuss, recommend, or sell securities or other investment products in addition to insurance products

Exceptions for bona fide credentials: An agent who holds a legitimate professional designation may inform clients of those credentials and make recommendations in accordance with the scope of those licenses. Florida law specifically recognizes the following as bona fide credentials:

• Certified Financial Planner (CFP®)
• Chartered Life Underwriter (CLU®)
• Chartered Financial Consultant (ChFC®)
• Life Underwriter Training Council Fellow (LUTCF)
• Appropriate FINRA securities license (Series 6, Series 7, etc.)

The 2008 Seibel Act significantly increased the penalties for agents or insurers who engage in certain unfair trade practices related to annuity sales. These enhanced penalties remain in effect today:

In addition to these monetary and criminal penalties, the Office of Insurance Regulation retains the power to rescind unsuitable contracts — requiring refund of the greater of the client’s original investment or the accumulated contract value. The Department of Financial Services may take any reasonably appropriate corrective action against agents for harm their recommendations cause clients. While technically not “penalties,” these mitigation powers serve as significant additional disincentives for unsuitable recommendations.

Compliance with Florida’s continuing education requirements is a necessary condition for the issuance and renewal of any appointment to represent an authorized insurer. Current requirements for life and health agents:

Continuing Education (CE) Hours

• Agents licensed less than 6 years: 24 CE credits every two-year compliance period
• Agents licensed 6 or more years: 20 CE credits every two-year compliance period
• All agents: must include a 4-credit Law & Ethics Update course (for the specific license line held) in each compliance period

Annuity Best Interest Training (One-Time Requirement)

Effective January 1, 2024, Florida requires all agents who sell annuities to complete a one-time 4-hour Annuity Best Interest certification course before selling any annuity product. This requirement is separate from the regular CE requirement, though if an approved provider submits the course for CE credit approval, the hours may also count toward the CE requirement:

• Agents who held a life insurance line of authority on January 1, 2024, must have completed this training by July 1, 2024
• New agents obtaining a life insurance license after January 1, 2024, must complete this training before selling any annuity
• Agents who completed a prior annuity training course before January 1, 2024, could satisfy the new requirement with either a new 4-hour course or a supplemental 1-hour course covering the Best Interest updates

Agent Contact Information

Under Florida Statutes §626.551, all Florida-licensed insurance agents must provide the Department of Financial Services with their email address, home phone number, and business phone number. If any of these change, the agent must notify the Department within 30 days. Failure to do so could result in a $250 fine (first offence). (These are the same rules that apply to notifying the Department of changes in the agent’s home, mailing, or business address.) Updates can be filed electronically through the Department of Financial Services’ MyProfile portal.

The National Association of Insurance Commissioners promotes standardized state regulations nationwide through “model laws” that serve as the basis for actual legislation adopted by the states. Much of Florida’s Insurance Code is based, at least in part, on NAIC model laws, and annuity suitability is no exception.

The History in Brief

• 2003 — NAIC adopted the Senior Protection in Annuity Transactions Model Regulation, covering sales of annuities to consumers aged 65 and older.
• 2004 — Florida enacted its initial annuity suitability legislation based on the 2003 NAIC model.
• 2006 — NAIC drafted a new, broader model — Suitability in Annuity Transactions Model Regulation — extending suitability protections to sales of annuities to consumers of all ages. Other states began adopting it. Some states extended coverage to all consumers; others extended suitability to non-annuity insurance products; still others followed the NASAA model for investment products.
• 2008 — When Florida updated its suitability law (the Seibel Act), the Legislature chose to continue applying the suitability requirements only to senior consumers (age 65+), rather than adopting the broader 2006 NAIC model.
• 2020 — NAIC adopted major revisions to Model #275, incorporating a best interest standard of care aligned with the SEC’s Regulation Best Interest. The revisions require all recommendations to be in the consumer’s best interest, apply to consumers of all ages, and impose the four-obligation framework (Care, Disclosure, Conflict of Interest, Documentation).
• 2024 — Florida adopted the 2020 NAIC Best Interest standard, effective January 1, 2024, amending F.S. §627.4554. Florida joined 48 other jurisdictions in adopting the revised model — completing the industry’s transition from age-limited suitability rules to a universal best interest standard covering all annuity sales to consumers of any age.

The 2024 adoption fulfilled what the 2006 NAIC model had anticipated: that suitability requirements for annuities should be “ageless.” FINRA had long taken that position for variable annuities — making no age distinction in its suitability requirements. Florida’s Best Interest standard now aligns with FINRA’s approach, applying uniform protections to all consumers regardless of age.