Suitability in Annuity Transactions Model Regulation
275-8
© 2020 National Association of Insurance Commissioners
(d) The insurer shall establish and maintain procedures for the review of each recommendation
prior to issuance of an annuity that are designed to ensure there is a reasonable basis to
determine that the recommended annuity would effectively address the particular
consumer’s financial situation, insurance needs and financial objectives. Such review
procedures may apply a screening system for the purpose of identifying selected
transactions for additional review and may be accomplished electronically or through other
means including, but not limited to, physical review. Such an electronic or other system
may be designed to require additional review only of those transactions identified for
additional review by the selection criteria;
(e) The insurer shall establish and maintain reasonable procedures to detect recommendations
that are not in compliance with Subsections A, B, D and E. This may include, but is not
limited to, confirmation of the consumer’s consumer profile information, systematic
customer surveys, producer and consumer interviews, confirmation letters, producer
statements or attestations and programs of internal monitoring. Nothing in this
subparagraph prevents an insurer from complying with this subparagraph by applying
sampling procedures, or by confirming the consumer profile information or other required
information under this section after issuance or delivery of the annuity;
(f) The insurer shall establish and maintain reasonable procedures to assess, prior to or upon
issuance or delivery of an annuity, whether a producer has provided to the consumer the
information required to be provided under this section;
(g) The insurer shall establish and maintain reasonable procedures to identify and address
suspicious consumer refusals to provide consumer profile information;
(h) The insurer shall establish and maintain reasonable procedures to identify and eliminate
any sales contests, sales quotas, bonuses, and non-cash compensation that are based on the
sales of specific annuities within a limited period of time. The requirements of this
subparagraph are not intended to prohibit the receipt of health insurance, office rent, office
support, retirement benefits or other employee benefits by employees as long as those
benefits are not based upon the volume of sales of a specific annuity within a limited period
of time; and
Drafting Note: The intent of Subparagraph (h) is to prohibit sales contests, sales quotas, bonuses and non-cash compensation based on the sale of a particular
product within a limited period of time, but not to prohibit general incentives regarding the sales of a company’s products with no emphasis on any particular
product.
(i) The insurer shall annually provide a written report to senior management, including to the
senior manager responsible for audit functions, which details a review, with appropriate
testing, reasonably designed to determine the effectiveness of the supervision system, the
exceptions found, and corrective action taken or recommended, if any.
(3) (a) Nothing in this subsection restricts an insurer from contracting for performance of a
function (including maintenance of procedures) required under this subsection. An insurer
is responsible for taking appropriate corrective action and may be subject to sanctions and
penalties pursuant to Section 8 of this regulation regardless of whether the insurer contracts
for performance of a function and regardless of the insurer’s compliance with
Subparagraph (b) of this paragraph.
(b) An insurer’s supervision system under this subsection shall include supervision of
contractual performance under this subsection. This includes, but is not limited to, the
following:
(i) Monitoring and, as appropriate, conducting audits to assure that the contracted
function is properly performed; and