Chapter 2 — Advertising, Records & Senior Annuities

Life insurance and annuity contracts require ads to be clear, truthful, and provide adequate disclosure of the benefits, limitations, and exclusions of policies sold. Standards are established to assure product descriptions prevent unfair, deceptive, and misleading advertising. In variable contracts where disclosure requirements are established pursuant to federal regulation, these rules are interpreted to minimize or eliminate conflict with Federal Regulations of the SEC and FINRA. [Chapter 69B-150]

All health insurance agents and sales representatives of HMOs in Florida are bound by the advertising rules under the OIR. The HMO is responsible for the acts of its agents and representatives. Advertising must disclose those exceptions, reductions, and limitations affecting the basic provisions of the policy. An ad may not use “only,” “just,” “merely,” “minimum,” or similar words to describe the applicability of any exceptions, reductions, or limitations. [Chapter 69B-191.057, 69B-150.006(3)(a-c)]

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. Records may be maintained by computer, photocopies, or other processes that accurately reproduce the actual document. [Source: §626.561(2)]

When making recommendations to senior consumers that result in the purchase of an annuity product, agents must document how they appropriately addressed the insurance needs and financial objectives of the senior consumer at the time of the transaction. [Source: §627.4554(1)]

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

Before executing a purchase or exchange of an annuity, an insurance agent or insurer must make reasonable efforts to obtain suitability information, which must include at a minimum:

• Personal information, including age and sex of the parties and ages and number of any dependents
• Tax status of the consumer
• Investment objectives of the consumer
• Source of funds to be used to purchase the annuity
• Applicant’s annual income
• Intended use of the annuity
• Applicant’s existing assets, including investment holdings
• Applicant’s liquid net worth and liquidity needs
• Applicant’s financial situation and needs
• Applicant’s risk tolerance
• Any other information considered relevant by the insurance agent or insurer

This information must be collected on a form of the department, completed and signed by the applicant and agent, in at least 12-point type. A true and correct executed copy must be provided by the agent to the insurer within 10 days after execution, and provided to the consumer no later than the date of delivery of the contract(s). [Source: §627.4554(4)]

An agent or insurer has no obligation to a senior consumer related to any recommendation if the senior consumer refuses to provide relevant information, decides to enter into an insurance transaction not based on a recommendation of the insurer or agent, or fails to provide complete or accurate information. If the consumer refuses to provide relevant information, the agent must obtain a signed verification from the senior on a form adopted by the department before execution of the sale. [Source: §627.4554(4)]

For a replacement or exchange of an annuity contract, the insurance agent must also provide information concerning differences between each existing annuity contract and the annuity contract being recommended, including: a comparison of benefits, terms, and limitations; a comparison of fees and charges; a written basis for the recommended exchange; and any other information considered relevant. Prior to execution, the agent must disclose that the purchase or exchange may have tax consequences and applicants should contact their tax advisors.

An annuity contract issued to a senior consumer may not contain surrender or deferred sales charges for a withdrawal exceeding ten percent of the amount withdrawn. The charge must be reduced so no surrender or deferred sales charge exists after the end of the 10th policy year or 10 years after the premium is paid, whichever is later. [Source: §627.4554(9)]

Insurers, managing general agents, insurance agencies, and insurance agents must maintain records of the information collected from the senior consumer for five years after the insurance transaction is completed. Records may be maintained in paper, photocopies, or electronically. [Source: §627.4554(6)]

The office may order an insurer, and the department may order an insurance agent, to take reasonably appropriate corrective action for any senior consumer harmed by a violation of suitability — including monetary restitution or, in the case of an insurer, rescission of the policy and a full refund of premiums paid or the accumulation value, whichever is greater. Any applicable penalty may be reduced or eliminated if corrective action was taken promptly after a violation was discovered. [Source: §627.4554(5)]

Any person registered with a member of FINRA who is required to make a suitability determination (FINRA Rule 2111, Suitability and Rule 2090, Know Your Customer) and who makes and documents such determination is deemed to satisfy the state requirements for the recommendation of annuities. [Source: §627.4554(8)]