NAIC Best Interest Model Regulation for Annuity Recommendations and Sales

The National Association of Insurance Commissioners (NAIC) amended Model Rule 275 for Annuity Recommendations and Sales to address consumer best interest. This model rule has been adopted in Arizona, Iowa and Rhode Island, with effective dates of 01/01/2021 for AZ and IA, and 04/01/2021 for RI.

In states which have adopted these new NAIC model regulations or similar regulations, all recommendations or sales must be in the best interest of the client. Under these new regulations, in addition to existing suitability requirements:

·     The client’s interest must be prioritized

·     Recommendations and sales must effectively address the client’s unique financial situation, insurance needs and financial objectives

·     Producers must meet specific “best interest” obligations regarding care, disclosure, conflict of interest and documentation

The following is a summary of new producer responsibilities under the 2020 NAIC Suitability in Annuity Transactions model regulation:*

·     Complete new training credits prior to any state deadline

·     Obtain a signed “Insurance Agent (Producer) Disclosure for Annuities” form at the time of recommendation or sale

·     Obtain additional signed forms if a consumer refuses to provide certain information or is making a purchasing decision against a producer’s recommendation**

·     Avoid and disclose any material conflict of interest

·     If requested by the client, disclose any cash and non-cash compensation in the form of a range or percentage

·     Communicate the basis or bases of any recommendation to the client and make a written record of any recommendation, the basis for the recommendation and any disclosures provided (including oral disclosures)

Requirements:

New Training: Below is a link for the Free RegEd course. A proctor is not needed if you do not choose CE credit. Please forward a copy of certificate so we can update our system to licensing@lbiusa.com or tzacharias@lbiusa.com.

-If original suitability training was taken (like course 390), you may substitute a 1hr course (Course 491).

-If not previously completed the 4yr suitability is required (course 490) before solicitation for an Annuity.

New/Updated Forms:

 -Best Interest form, Consumer Profile (revised suitability) and new and revised disclosure forms

New Producer Documentation

Below are some additional resource links to look over:

RegEd FAQ’s (click here)

NA NAIC Model #275: A compliance blueprint (click here)

Lincoln NAIC Annuity Suitability FAQs (click here)