Section 431:10D-623 - Duties of insurers and producers(a) A producer, when making a recommendation of an annuity, shall act in the best interest of the consumer under the circumstances known at the time the recommendation is made, without placing the producer's or the insurer's financial interest ahead of the consumer's interest. A producer has acted in the best interest of the consumer if the producer has satisfied the obligations regarding care, disclosure, conflict of interest, and documentation as set forth in this part.(b)(1) Except as provided under paragraph (2), a producer shall have no obligation to a consumer under section 431:10D-627 related to any annuity transaction if: (A) No recommendation is made;(B) A recommendation was made based on materially inaccurate information provided by the consumer;(C) A consumer refuses to provide relevant consumer profile information and the annuity transaction is not recommended; or(D) A consumer decides to enter into an annuity transaction that is not based on a recommendation of the producer.(2) An insurer's issuance of an annuity subject to paragraph (1) shall be reasonable under all the circumstances actually known to the insurer at the time the annuity is issued. (c) Except as permitted under subsection (b), an insurer shall not issue an annuity recommended to a consumer unless there is a reasonable basis to believe the annuity would effectively address the particular consumer's financial situation, insurance needs, and financial objectives based on the consumer profile information.(d) An insurer shall establish and maintain a supervision system that is reasonably designed to achieve the insurer's and its producers' compliance with this part, including:(1) Reasonable procedures to inform the insurer's producers of the requirements of this part, including incorporating the requirements of this part into relevant producer training manuals;(2) Standards for producer product training, including reasonable procedures to require its producers to comply with section 431:10D-626;(3) Product-specific training and training materials that explain all material features of its annuity products to its producers;(4) Procedures for the review of each recommendation prior to the issuance of an annuity 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. The 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. An electronic or other system may be designed to require additional review only of those transactions identified for additional review by the selection criteria;(5) Reasonable procedures to detect recommendations that are not in compliance with subsections (b), (g), and (h), and sections 431:10D-627, 431:10D-628, 431:10D-629, and 431:10D-630. The reasonable procedures may include confirmation of the consumer profile information, systematic consumer surveys, producer and consumer interviews, confirmation letters, producer statements or attestations, and programs of internal monitoring; provided that nothing in this paragraph shall prevent an insurer applying sampling procedures or confirming the consumer profile information or other required information under this section after issuance or delivery of the annuity;(6) Reasonable procedures to assess, before 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;(7) Reasonable procedures to identify and address suspicious consumer refusals to provide consumer profile information;(8) Reasonable procedures to identify and eliminate any sales contests, sale 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 paragraph shall not prohibit the receipt of health insurance, office rent, office support, retirement benefits, or other employee benefits by employees; provided that those benefits are not based upon the volume of sales of a specific annuity within a limited period of time;(9) Annual review and testing of the supervision system that shall be documented in a written report to the insurer's senior management, including the senior manager responsible for audit functions, to determine the effectiveness of the supervision system, the exceptions found, and corrective action taken or recommended, if any;(10) Procedures for monitoring contracts and, as appropriate, conducting audits to assure that any contracted functions are properly performed; and(11) Annual certification based on reasonable facts from a senior manager who has responsibility for contracted functions that the contracted functions are properly performed.(e) An insurer may contract for performance of any functions, including maintenance of procedures, required by subsection (d)(1) to (9); provided that an insurer shall be responsible for taking any appropriate corrective action and may be subject to sanctions and penalties pursuant to section 431:10D-624 regardless of whether the insurer contracts for performance of a function and regardless of the insurer's compliance with subsection (d).(f) An insurer shall not be required to include in its system of supervision:(1) A producer's recommendations to consumers of products other than the annuities offered by the insurer; or(2) Consideration of or comparison to options available to the producer or compensation relating to those options other than annuities or other products offered by the insurer.(g) Neither a producer nor an insurer shall dissuade, or attempt to dissuade, a consumer from: (1) Truthfully responding to an insurer's request for confirmation of the consumer profile information;(2) Filing a complaint; or(3) Cooperating with the investigation of a complaint.(h) Recommendations and sales of annuities made in compliance with comparable standards shall satisfy the requirements of this part. This section shall apply to all recommendations and sales of annuities made by financial professionals in compliance with business rules, controls, and procedures that satisfy a comparable standard even if the standard would not otherwise apply to the product or recommendation at issue. Nothing in this subsection shall limit the commissioner's ability to investigate and enforce the provisions of this part. Nothing in this subsection shall limit the insurer's obligation to comply with subsection (c); provided that the insurer may base its analysis on information received from either the financial professional or the entity supervising the financial professional.(i) For subsection (h) to apply, an insurer shall: (1) Monitor the relevant conduct of the financial professional seeking to rely on subsection (h) or the entity responsible for supervising the financial professional, such as the financial professional's broker-dealer or an investment adviser registered under federal or state securities laws using information collected in the normal course of an insurer's business; and(2) Provide to the entity responsible for supervising the financial professional seeking to rely on subsection (h), such as the financial professional's broker-dealer or investment adviser registered under federal or state securities laws, information and reports that are reasonably appropriate to assist the entity to maintain its supervision system .
Amended by L 2022, c 58,§ 7, eff. 1/1/2023.Amended by L 2011, c 108, § I-5, eff. 1/1/2012. L 2007, c 257 , pt of §2 .