HB 0965

1
A bill to be entitled
2An act relating to annuity investments by seniors;
3creating s. 627.4554, F.S.; providing a purpose; providing
4application; providing definitions; specifying duties of
5insurers and insurance agents relating to making annuity
6investment recommendations to senior consumers; providing
7requirements; limiting responsibility of insurers or
8insurance agents under certain circumstances; requiring a
9system of compliance and supervision; providing for
10enforcement by the Office of Financial Regulation of the
11Financial Services Commission; authorizing the office to
12issue certain orders to mitigate certain responsibilities
13of insurers or insurance agents; providing for reduction
14or elimination of certain penalties under certain
15circumstances; providing recordkeeping requirements;
16providing exemptions from application; requiring the
17Department of Financial Services and the office to enforce
18compliance; authorizing the department and commission to
19adopt rules; providing an effective date.
20
21Be It Enacted by the Legislature of the State of Florida:
22
23     Section 1.  Section 627.4554, Florida Statutes, is created
24to read:
25     627.4554  Annuity investments by seniors.--
26     (1)  PURPOSE; CONSTRUCTION.--
27     (a)  The purpose of this section is to set forth standards
28and procedures for recommendations to senior consumers that
29result in a transaction involving annuity products to
30appropriately address the insurance needs and financial
31objectives of senior consumers at the time of the transaction.
32     (b)  Nothing in this section shall be construed to create
33or imply a private cause of action for a violation of this
34section.
35     (2)  APPLICATION.--This section applies to any
36recommendation to purchase or exchange an annuity made to a
37senior consumer by an insurance agent, or an insurer where no
38agent is involved, that results in the purchase or exchange
39recommended.
40     (3)  DEFINITIONS.--For purposes of this section:
41     (a)  "Annuity" means a fixed annuity or variable annuity
42that is individually solicited, whether the product is
43classified as an individual annuity or a group annuity.
44     (b)  "Recommendation" means advice provided by an insurance
45agent, or an insurer if no insurance agent is involved, to an
46individual senior consumer that results in a purchase or
47exchange of an annuity in accordance with that advice.
48     (c)  "Senior consumer" means a person 64 years of age or
49older. In the event of a joint purchase by more than one party,
50a purchaser is considered to be a senior consumer if any of the
51parties is age 64 or older.
52     (4)  DUTIES OF INSURERS AND INSURANCE AGENTS.--
53     (a)  In recommending to a senior consumer the purchase of
54an annuity or the exchange of an annuity that results in another
55insurance transaction or series of insurance transactions, an
56insurance agent, or an insurer if no insurance agent is
57involved, shall have reasonable grounds for believing that the
58recommendation is suitable for the senior consumer on the basis
59of the facts disclosed by the senior consumer as to his or her
60investments and other insurance products and as to his or her
61financial situation and needs.
62     (b)  Before executing a purchase or exchange of an annuity
63resulting from a recommendation to a senior consumer, an
64insurance agent, or an insurer if no insurance agent is
65involved, shall make reasonable efforts to obtain information
66concerning the senior consumer's financial status, tax status,
67and investment objectives and such other information used or
68considered to be reasonable by the insurance agent, or the
69insurer if no agent is involved, in making the recommendation.
70     (c)1.  Except as provided under subparagraph 2., an
71insurance agent, or an insurer if no insurance agent is
72involved, shall not have any obligation to a senior consumer
73under paragraph (a) related to any recommendation if the senior
74consumer:
75     a.  Refuses to provide relevant information requested by
76the insurer or insurance agent;
77     b.  Decides to enter into an insurance transaction that is
78not based on a recommendation of the insurer or insurance agent;
79or
80     c.  Fails to provide complete or accurate information.
81     2.  An insurer or insurance agent's recommendation subject
82to subparagraph 1. shall be reasonable under all the
83circumstances actually known to the insurer or insurance agent
84at the time of the recommendation.
85     (d)1.  An insurer or insurance agent shall ensure that a
86system to supervise recommendations that is reasonably designed
87to achieve compliance with this section is established and
88maintained by complying with subparagraphs 3., 4., and 5., or
89shall establish and maintain such a system, including, but not
90limited to:
91     a.  Maintaining written procedures.
92     b.  Conducting periodic reviews of its records that are
93reasonably designed to assist in detecting and preventing
94violations of this section.
95     2.  A managing general agent and an insurance agency shall
96adopt a system established by an insurer to supervise
97recommendations of its insurance agents that is reasonably
98designed to achieve compliance with this section or shall
99establish and maintain such a system, including, but not limited
100to:
101     a.  Maintaining written procedures.
102     b.  Conducting periodic reviews of records that are
103reasonably designed to assist in detecting and preventing
104violations of this section.
105     3.  An insurer may contract with a third party, including a
106managing general agent or an insurance agency, to establish and
107maintain a system of supervision as required by subparagraph 1.
108with respect to insurance agents under contract with or employed
109by the third party.
110     4.  An insurer shall make reasonable inquiry to ensure that
111such third party contracting under subparagraph 3. is performing
112the functions required under subparagraph 1. and shall take such
113action as is reasonable under the circumstances to enforce the
114contractual obligation to perform the functions. An insurer may
115comply with its obligation to make reasonable inquiry by:
116     a.  Annually obtaining a certification from a third party
117senior manager who has responsibility for the delegated
118functions that the manager has a reasonable basis to represent,
119and does represent, that the third party is performing the
120required functions.
121     b.  Based on reasonable selection criteria, periodically
122selecting third parties contracting under subparagraph 3. for a
123review to determine whether the third parties are performing the
124required functions. The insurer shall perform any procedures
125necessary to conduct the review that are reasonable under the
126circumstances.
127     5.  An insurer that contracts with a third party pursuant
128to subparagraph 3. and complies with the requirements specified
129in subparagraph 4. is deemed to have fulfilled its
130responsibilities under subparagraph 1.
131     6.  An insurer, managing general agent, or insurance agency
132is not required by subparagraph 1. or subparagraph 2. to:
133     a.  Review or provide for review of all transactions
134solicited by an insurance agent; or
135     b.  Include in its system of supervision an insurance
136agent's recommendations to senior consumers of products other
137than the annuities offered by the insurer, managing general
138agent, or insurance agency.
139     7.  A managing general agent or insurance agency
140contracting with an insurer pursuant to subparagraph 3. shall
141promptly, when requested by the insurer pursuant to subparagraph
1424., give a certification as described in subparagraph 4. or give
143a clear statement that the managing general agent or insurance
144agency is unable to meet the certification criteria.
145     8.  A person may not provide a certification under sub-
146subparagraph 4.a. unless the person is a senior manager with
147responsibility for the delegated functions and has a reasonable
148basis for making the certification.
149     (5)  MITIGATION OF RESPONSIBILITY.--
150     (a)  The office may order an insurer to take reasonably
151appropriate corrective action for any senior consumer harmed by
152a violation of this section by the insurer or the insurer's
153insurance agent.
154     (b)  The department may order:
155     1.  An insurance agent to take reasonably appropriate
156corrective action for any senior consumer harmed by a violation
157of this section by the insurance agent.
158     2.  A managing general agency or insurance agency that
159employs or contracts with an insurance agent to sell or solicit
160the sale of annuities to senior consumers to take reasonably
161appropriate corrective action for any senior consumer harmed by
162a violation of this section by the insurance agent.
163     (c)  Any applicable penalty under this chapter for a
164violation of paragraph (4)(a), paragraph (4)(b), or subparagraph
165(4)(c)2. may be reduced or eliminated, according to a schedule
166adopted by the office, if corrective action for the senior
167consumer was taken promptly after a violation was discovered.
168     (6)  RECORDKEEPING.--
169     (a)  Insurers, managing general agents, insurance agencies,
170and insurance agents shall maintain or be able to make available
171to the department or office, as appropriate, records of the
172information collected from the senior consumer and other
173information used in making the recommendations that were the
174basis for insurance transactions for 5 years after the insurance
175transaction is completed by the insurer. An insurer is
176permitted, but shall not be required, to maintain documentation
177on behalf of an insurance agent.
178     (b)  Records required to be maintained by this regulation
179may be maintained in paper, photographic, microprocess,
180magnetic, mechanical or electronic media, or by any process that
181accurately reproduces the actual document.
182     (7)  EXEMPTIONS.--Unless otherwise specifically included,
183this section shall not apply to recommendations involving:
184     (a)  Direct-response solicitations where there is no
185recommendation based on information collected from the senior
186consumer pursuant to this section.
187     (b)  Contracts used to fund:
188     1.  An employee pension or welfare benefit plan that is
189covered by the Employee Retirement and Income Security Act;
190     2.  A plan described by Sections 401(a), 401(k), 403(b),
191408(k), or 408(p) of the Internal Revenue Code of 1986, as
192amended, if established or maintained by an employer;
193     3.  A government or church plan defined in Section 414 of
194the Internal Revenue Code of 1986, as amended, a government or
195church welfare benefit plan, or a deferred compensation plan of
196a state or local government or tax-exempt organization under
197Section 457 of the Internal Revenue Code of 1986, as amended;
198     4.  A nonqualified deferred compensation arrangement
199established or maintained by an employer or plan sponsor;
200     5.  Settlements of or assumptions of liabilities associated
201with personal injury litigation or any dispute or claim
202resolution process; or
203     6.  Prepaid funeral contracts.
204     (8)(a)  The department shall enforce compliance with this
205section by insurance agents, insurance agencies, and managing
206general agents and may adopt rules to implement this section and
207apply this section to insurance agents and managing general
208agents.
209     (b)  The office shall enforce compliance with this section
210by insurers. The commission may adopt rules to implement this
211section and apply this section to insurers.
212     Section 2.  This act shall take effect October 1, 2004.


CODING: Words stricken are deletions; words underlined are additions.