| 1 | A bill to be entitled |
| 2 | An act relating to annuity investments by seniors; |
| 3 | creating s. 627.4554, F.S.; providing a purpose; providing |
| 4 | application; providing definitions; specifying duties of |
| 5 | insurers and insurance agents relating to making annuity |
| 6 | investment recommendations to senior consumers; providing |
| 7 | requirements; limiting responsibility of insurers or |
| 8 | insurance agents under certain circumstances; requiring a |
| 9 | system of compliance and supervision; providing for |
| 10 | enforcement by the Office of Financial Regulation of the |
| 11 | Financial Services Commission; authorizing the office to |
| 12 | issue certain orders to mitigate certain responsibilities |
| 13 | of insurers or insurance agents; providing for reduction |
| 14 | or elimination of certain penalties under certain |
| 15 | circumstances; providing recordkeeping requirements; |
| 16 | providing exemptions from application; requiring the |
| 17 | Department of Financial Services and the office to enforce |
| 18 | compliance; authorizing the department and commission to |
| 19 | adopt rules; providing an effective date. |
| 20 |
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| 21 | Be It Enacted by the Legislature of the State of Florida: |
| 22 |
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| 23 | Section 1. Section 627.4554, Florida Statutes, is created |
| 24 | to read: |
| 25 | 627.4554 Annuity investments by seniors.-- |
| 26 | (1) PURPOSE; CONSTRUCTION.-- |
| 27 | (a) The purpose of this section is to set forth standards |
| 28 | and procedures for recommendations to senior consumers that |
| 29 | result in a transaction involving annuity products to |
| 30 | appropriately address the insurance needs and financial |
| 31 | objectives of senior consumers at the time of the transaction. |
| 32 | (b) Nothing in this section shall be construed to create |
| 33 | or imply a private cause of action for a violation of this |
| 34 | section. |
| 35 | (2) APPLICATION.--This section applies to any |
| 36 | recommendation to purchase or exchange an annuity made to a |
| 37 | senior consumer by an insurance agent, or an insurer where no |
| 38 | agent is involved, that results in the purchase or exchange |
| 39 | recommended. |
| 40 | (3) DEFINITIONS.--For purposes of this section: |
| 41 | (a) "Annuity" means a fixed annuity or variable annuity |
| 42 | that is individually solicited, whether the product is |
| 43 | classified as an individual annuity or a group annuity. |
| 44 | (b) "Recommendation" means advice provided by an insurance |
| 45 | agent, or an insurer if no insurance agent is involved, to an |
| 46 | individual senior consumer that results in a purchase or |
| 47 | exchange of an annuity in accordance with that advice. |
| 48 | (c) "Senior consumer" means a person 64 years of age or |
| 49 | older. In the event of a joint purchase by more than one party, |
| 50 | a purchaser is considered to be a senior consumer if any of the |
| 51 | parties is age 64 or older. |
| 52 | (4) DUTIES OF INSURERS AND INSURANCE AGENTS.-- |
| 53 | (a) In recommending to a senior consumer the purchase of |
| 54 | an annuity or the exchange of an annuity that results in another |
| 55 | insurance transaction or series of insurance transactions, an |
| 56 | insurance agent, or an insurer if no insurance agent is |
| 57 | involved, shall have reasonable grounds for believing that the |
| 58 | recommendation is suitable for the senior consumer on the basis |
| 59 | of the facts disclosed by the senior consumer as to his or her |
| 60 | investments and other insurance products and as to his or her |
| 61 | financial situation and needs. |
| 62 | (b) Before executing a purchase or exchange of an annuity |
| 63 | resulting from a recommendation to a senior consumer, an |
| 64 | insurance agent, or an insurer if no insurance agent is |
| 65 | involved, shall make reasonable efforts to obtain information |
| 66 | concerning the senior consumer's financial status, tax status, |
| 67 | and investment objectives and such other information used or |
| 68 | considered to be reasonable by the insurance agent, or the |
| 69 | insurer if no agent is involved, in making the recommendation. |
| 70 | (c)1. Except as provided under subparagraph 2., an |
| 71 | insurance agent, or an insurer if no insurance agent is |
| 72 | involved, shall not have any obligation to a senior consumer |
| 73 | under paragraph (a) related to any recommendation if the senior |
| 74 | consumer: |
| 75 | a. Refuses to provide relevant information requested by |
| 76 | the insurer or insurance agent; |
| 77 | b. Decides to enter into an insurance transaction that is |
| 78 | not based on a recommendation of the insurer or insurance agent; |
| 79 | or |
| 80 | c. Fails to provide complete or accurate information. |
| 81 | 2. An insurer or insurance agent's recommendation subject |
| 82 | to subparagraph 1. shall be reasonable under all the |
| 83 | circumstances actually known to the insurer or insurance agent |
| 84 | at the time of the recommendation. |
| 85 | (d)1. An insurer or insurance agent shall ensure that a |
| 86 | system to supervise recommendations that is reasonably designed |
| 87 | to achieve compliance with this section is established and |
| 88 | maintained by complying with subparagraphs 3., 4., and 5., or |
| 89 | shall establish and maintain such a system, including, but not |
| 90 | limited to: |
| 91 | a. Maintaining written procedures. |
| 92 | b. Conducting periodic reviews of its records that are |
| 93 | reasonably designed to assist in detecting and preventing |
| 94 | violations of this section. |
| 95 | 2. A managing general agent and an insurance agency shall |
| 96 | adopt a system established by an insurer to supervise |
| 97 | recommendations of its insurance agents that is reasonably |
| 98 | designed to achieve compliance with this section or shall |
| 99 | establish and maintain such a system, including, but not limited |
| 100 | to: |
| 101 | a. Maintaining written procedures. |
| 102 | b. Conducting periodic reviews of records that are |
| 103 | reasonably designed to assist in detecting and preventing |
| 104 | violations of this section. |
| 105 | 3. An insurer may contract with a third party, including a |
| 106 | managing general agent or an insurance agency, to establish and |
| 107 | maintain a system of supervision as required by subparagraph 1. |
| 108 | with respect to insurance agents under contract with or employed |
| 109 | by the third party. |
| 110 | 4. An insurer shall make reasonable inquiry to ensure that |
| 111 | such third party contracting under subparagraph 3. is performing |
| 112 | the functions required under subparagraph 1. and shall take such |
| 113 | action as is reasonable under the circumstances to enforce the |
| 114 | contractual obligation to perform the functions. An insurer may |
| 115 | comply with its obligation to make reasonable inquiry by: |
| 116 | a. Annually obtaining a certification from a third party |
| 117 | senior manager who has responsibility for the delegated |
| 118 | functions that the manager has a reasonable basis to represent, |
| 119 | and does represent, that the third party is performing the |
| 120 | required functions. |
| 121 | b. Based on reasonable selection criteria, periodically |
| 122 | selecting third parties contracting under subparagraph 3. for a |
| 123 | review to determine whether the third parties are performing the |
| 124 | required functions. The insurer shall perform any procedures |
| 125 | necessary to conduct the review that are reasonable under the |
| 126 | circumstances. |
| 127 | 5. An insurer that contracts with a third party pursuant |
| 128 | to subparagraph 3. and complies with the requirements specified |
| 129 | in subparagraph 4. is deemed to have fulfilled its |
| 130 | responsibilities under subparagraph 1. |
| 131 | 6. An insurer, managing general agent, or insurance agency |
| 132 | is not required by subparagraph 1. or subparagraph 2. to: |
| 133 | a. Review or provide for review of all transactions |
| 134 | solicited by an insurance agent; or |
| 135 | b. Include in its system of supervision an insurance |
| 136 | agent's recommendations to senior consumers of products other |
| 137 | than the annuities offered by the insurer, managing general |
| 138 | agent, or insurance agency. |
| 139 | 7. A managing general agent or insurance agency |
| 140 | contracting with an insurer pursuant to subparagraph 3. shall |
| 141 | promptly, when requested by the insurer pursuant to subparagraph |
| 142 | 4., give a certification as described in subparagraph 4. or give |
| 143 | a clear statement that the managing general agent or insurance |
| 144 | agency is unable to meet the certification criteria. |
| 145 | 8. A person may not provide a certification under sub- |
| 146 | subparagraph 4.a. unless the person is a senior manager with |
| 147 | responsibility for the delegated functions and has a reasonable |
| 148 | basis for making the certification. |
| 149 | (5) MITIGATION OF RESPONSIBILITY.-- |
| 150 | (a) The office may order an insurer to take reasonably |
| 151 | appropriate corrective action for any senior consumer harmed by |
| 152 | a violation of this section by the insurer or the insurer's |
| 153 | insurance agent. |
| 154 | (b) The department may order: |
| 155 | 1. An insurance agent to take reasonably appropriate |
| 156 | corrective action for any senior consumer harmed by a violation |
| 157 | of this section by the insurance agent. |
| 158 | 2. A managing general agency or insurance agency that |
| 159 | employs or contracts with an insurance agent to sell or solicit |
| 160 | the sale of annuities to senior consumers to take reasonably |
| 161 | appropriate corrective action for any senior consumer harmed by |
| 162 | a violation of this section by the insurance agent. |
| 163 | (c) Any applicable penalty under this chapter for a |
| 164 | violation of paragraph (4)(a), paragraph (4)(b), or subparagraph |
| 165 | (4)(c)2. may be reduced or eliminated, according to a schedule |
| 166 | adopted by the office, if corrective action for the senior |
| 167 | consumer was taken promptly after a violation was discovered. |
| 168 | (6) RECORDKEEPING.-- |
| 169 | (a) Insurers, managing general agents, insurance agencies, |
| 170 | and insurance agents shall maintain or be able to make available |
| 171 | to the department or office, as appropriate, records of the |
| 172 | information collected from the senior consumer and other |
| 173 | information used in making the recommendations that were the |
| 174 | basis for insurance transactions for 5 years after the insurance |
| 175 | transaction is completed by the insurer. An insurer is |
| 176 | permitted, but shall not be required, to maintain documentation |
| 177 | on behalf of an insurance agent. |
| 178 | (b) Records required to be maintained by this regulation |
| 179 | may be maintained in paper, photographic, microprocess, |
| 180 | magnetic, mechanical or electronic media, or by any process that |
| 181 | accurately reproduces the actual document. |
| 182 | (7) EXEMPTIONS.--Unless otherwise specifically included, |
| 183 | this section shall not apply to recommendations involving: |
| 184 | (a) Direct-response solicitations where there is no |
| 185 | recommendation based on information collected from the senior |
| 186 | consumer pursuant to this section. |
| 187 | (b) Contracts used to fund: |
| 188 | 1. An employee pension or welfare benefit plan that is |
| 189 | covered by the Employee Retirement and Income Security Act; |
| 190 | 2. A plan described by Sections 401(a), 401(k), 403(b), |
| 191 | 408(k), or 408(p) of the Internal Revenue Code of 1986, as |
| 192 | amended, if established or maintained by an employer; |
| 193 | 3. A government or church plan defined in Section 414 of |
| 194 | the Internal Revenue Code of 1986, as amended, a government or |
| 195 | church welfare benefit plan, or a deferred compensation plan of |
| 196 | a state or local government or tax-exempt organization under |
| 197 | Section 457 of the Internal Revenue Code of 1986, as amended; |
| 198 | 4. A nonqualified deferred compensation arrangement |
| 199 | established or maintained by an employer or plan sponsor; |
| 200 | 5. Settlements of or assumptions of liabilities associated |
| 201 | with personal injury litigation or any dispute or claim |
| 202 | resolution process; or |
| 203 | 6. Prepaid funeral contracts. |
| 204 | (8)(a) The department shall enforce compliance with this |
| 205 | section by insurance agents, insurance agencies, and managing |
| 206 | general agents and may adopt rules to implement this section and |
| 207 | apply this section to insurance agents and managing general |
| 208 | agents. |
| 209 | (b) The office shall enforce compliance with this section |
| 210 | by insurers. The commission may adopt rules to implement this |
| 211 | section and apply this section to insurers. |
| 212 | Section 2. This act shall take effect October 1, 2004. |