Section Ins 305.05 - Duties of Ins urers and of Insurance Producers(a) In recommending to a consumer the purchase of an annuity or the exchange of an annuity that results in another Insurance transaction or series of Insurance transactions, the Insurance producer, or the Ins urer where no producer is involved, shall have reasonable grounds for believing that the recommendation is suitable for the consumer on the basis of the facts disclosed by the consumer as to his or her investments and other Insurance products and as to his or her financial situation and needs, including the consumer's suitability information, and that there is a reasonable basis to believe all of the following: (1) The consumer has been reasonably informed of various features of the annuity, such as the potential surrender period and surrender charge, potential tax penalty if the consumer sells, exchanges, surrenders or annuitizes the annuity, mortality and expense fees, investment advisory fees, potential charges for and features of riders, limitations on interest returns, Insurance and investment components and market risk;(2) The consumer would benefit from certain features of the annuity, such as tax-deferred growth, annuitization or death or living benefit;(3) The particular annuity as a whole, the underlying subaccounts to which funds are allocated at the time of purchase or exchange of the annuity, and riders and similar product enhancements, if any, are suitable, and in the case of an exchange or replacement, the transaction as a whole is suitable, for the particular consumer based on his or her suitability information; and(4) In the case of an exchange or replacement of an annuity, the exchange or replacement is suitable including taking into consideration whether: a. The consumer will incur a surrender charge, be subject to the commencement of a new surrender period, lose existing benefits, such as death, living or other contractual benefits, or be subject to increased fees, investment advisory fees or charges for riders and similar product enhancements;b. The consumer would benefit from product enhancements and improvements; andc. The consumer has had another annuity exchange or replacement and, in particular, an exchange or replacement within the preceding 36 months.(b) Prior to the execution of a purchase, exchange or replacement of an annuity resulting from a recommendation, an Insurance producer, or an Ins urer where no producer is involved, shall make reasonable efforts to obtain the consumer's suitability information.(c) Except as permitted under paragraph (d), an Ins urer shall not issue an annuity recommended to a consumer unless there is a reasonable basis to believe the annuity is suitable based on the consumer's suitability information.(d)(1) Except as provided under subparagraph (d)(2) of this subsection, neither an Insurance producer, nor an Ins urer, shall have any obligation to a consumer under subsection (a) or (c) related to an annuity transaction if: a. No recommendation is made;b. A recommendation was made and was later found to have been prepared based on materially inaccurate information provided by the consumer;c. A consumer refuses to provide relevant suitability information and the annuity transaction is not recommended; ord. A consumer decides to enter into an annuity transaction that is not based on a recommendation of the Ins urer or the Insurance producer.(2) An Ins urer's issuance of an annuity subject to paragraph (1) shall be reasonable under all the circumstances actually known to the Ins urer at the time the annuity is issued.(e) An Insurance producer or, where no Insurance producer is involved, the responsible Ins urer representative, shall at the time of sale: (1) Make a record of any recommendation subject to Ins 305.05(a) of this rule.(2) Obtain a customer signed statement documenting a customer's refusal to provide suitability information, if any; and(3) Obtain a customer signed statement acknowledging that an annuity transaction is not recommended if a customer decides to enter into an annuity transaction that is not based on the Insurance producer's or Ins urer's recommendation.(f)(1) An Ins urer shall establish a supervision system that is reasonably designed to achieve the Ins urer's and its Insurance producers' compliance with this rule, including, but not limited to, the following: a. The Ins urer shall maintain reasonable procedures to inform its Insurance producers of the requirements of this rule and shall incorporate the requirements of this rule into relevant Insurance producer training manuals;b. The Ins urer shall establish standards for Insurance producer product training and shall maintain reasonable procedures to require its Insurance producers to comply with the requirements of Ins 305.06 of this rule;c. The Ins urer shall provide product-specific training and training materials which explain all material features of its annuity products to its Insurance producers;d. The Ins urer shall maintain procedures for review of each recommendation prior to issuance of an annuity that are designed to ensure that there is a reasonable basis to determine that a recommendation is suitable. 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 system or other system may be designed to require additional review only of those transactions identified for additional review by the selection criteria;e. The Ins urer shall maintain reasonable procedures to detect recommendations that are not suitable. This may include, but is not limited to, confirmation of consumer suitability information, systematic customer surveys, interviews, confirmation letters and programs of internal monitoring. Nothing in this clause prevents an Ins urer from complying with this clause by applying sampling procedures, or by confirming suitability information after issuance or delivery of the annuity; andf. The Ins urer shall annually provide a 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.(2)a. Nothing in this paragraph restricts an Ins urer from contracting for performance of a function, including maintenance of procedures, required under subparagraph (f)(1). An Ins urer is responsible for taking appropriate corrective action and may be subject to sanctions and penalties pursuant to Ins 305.07 of this rule regardless of whether the Ins urer contracts for performance of a function and regardless of the Ins urer's compliance with subparagraph b. of this paragraph.b. An Ins urer's supervision system under subparagraph (f)(1) shall include supervision of contractual performance under this subsection. This includes, but is not limited to, the following: 1. Monitoring and, as appropriate, conducting audits to assure that the contracted function is properly performed; and2. Annually obtaining a certification from a senior manager who has responsibility for the contracted function that the manager has a reasonable basis to represent, and does represent, that the function is properly performed.(3) An Ins urer is not required to include in its system of supervision an Insurance producer's recommendations to consumers of products other than the annuities offered by the Ins urer.(g) An Insurance producer shall not dissuade, or attempt to dissuade, a consumer from: (1) Truthfully responding to an Ins urer's request for confirmation of suitability information;(2) Filing a complaint; or(3) Cooperating with the investigation of a complaint.(h)(1) Sales made in compliance with FINRA requirements pertaining to suitability and supervision of annuity transactions shall satisfy the requirements under this rule. This paragraph applies to FINRA broker-dealer sales of variable annuities and fixed annuities if the suitability and supervision is similar to those applied to variable annuity sales. However, nothing in this paragraph shall limit the Insurance commissioner's ability to investigate and enforce the provisions of this rule.(2) For subparagraph (h)(1) to apply, an Ins urer shall:a. Monitor the FINRA member broker-dealer using information collected in the normal course of an Ins urer's business; andb. Provide to the FINRA member broker-dealer information and reports that are reasonably appropriate to assist the FINRA member broker-dealer to maintain its supervision system.N.H. Code Admin. R. Ins 305.05
Amended byVolume XXXIV Number 37, Filed September 11, 2014, Proposed by #10654, Effective 1/1/2015, Expires1/1/2025.