State Roundup

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The great majority of states has adjourned or is in recess for the 2011-2012 regular legislative session; only California, South Carolina, Pennsylvania, the District of Columbia, Michigan, Ohio, and New Jersey have projected adjournment dates beyond July. Accordingly, all legislative activity, including legislation affecting the annuity industry, is significantly reduced, although state regulatory agencies remain active throughout the calendar year. The following highlights several bills or rules of particular interest to our industry:

IDAHO: Idaho DOI Files Intent to Promulgate Rule on Suitability in Annuity Transactions

On Thursday, July 19, 2010, NAFA participated in a public hearing with the Idaho Department of Insurance, during which the Department discussed its intent to adopt Proposed IDAPA 18.01.09 (Rule 9), relating to Consumer Protection in Annuity Transactions. The proposed rule mirrors the April 2010 NAIC Suitability in Annuity Transactions Model Regulation (#275) and would replace Idaho’s current ID Current Rule 9.

The discussion at the hearing centered on two issues, both relating to the proposed rule’s recordkeeping requirements. In the first instance, Section 9 of the Model Regulation, which the NAIC deems as optional, would require insurers, agencies, and producers to maintain records and information used in making an annuity recommendation that is the basis for an annuity transaction for an unspecified number of years after the insurance action is completed by the insurer. Idaho’s proposed rule includes this optional recordkeeping requirement (see subsection 021.01), and there’s discussion centered on whether such records should be kept for any period of time after the contract is terminated or is no longer in force. NAFA and the ACLI expressed the opinion that it was not necessary under the Suitability rules to require record retention for any period of years beyond the term of the contract. The Department was receptive to this comment and may, instead, rely on the language in Section 021.01 of the current rule, requiring suitability-related record retention for “as long as the contract remains in force.”

In the second instance, the Department noted that its proposed rule kept the current rule’s requirement that producers who have terminated their appointment or whose license is suspended or revoked must remit records described in 021.01 to the insurer within 21 days of termination or change in license status. (Note that this language is not included in the Model Regulation.)

The Department anticipates that it will publish its Notice of Proposed Rule no later than August 3, 2012. At that time, the Department will take additional written comments. In the early Fall, it will issue a Notice of Pending Rule, and this pending rule will be considered by the 2013 Idaho legislature. The approved rule will become effective on the date that the Legislature adjourns – likely late March or early April 2013.

Insurance producers who are licensed in Idaho, as of the effective date, will have an additional six (6) months to complete the required one-time, four-credit annuity training course. In addition, the rule recognizes reciprocity for producers who complete training requirements of another State that are “substantially similar” to Idaho’s requirements.

CALIFORNIA: California Considering Bill Relating to Insurance Selling Practices Targeted to Seniors

California Senate Bill 1770 proposes various changes to the California Insurance Code related to insurance transactions involving persons 65 years of age or older (a “senior”). The bill would make it illegal for insurance agents who are not also California-licensed attorneys to deliver legal documents (such as trust documents) to a senior other than an annuity contract if the purpose of the delivery is to sell an insurance product; for insurance agents who are also attorneys, the bill would allow such delivery, but it would require the agent-attorney to comply with the disclosure requirements of the attorney professional code of ethics as a fiduciary. The bill would also require certain disclosures on worksheets and questionnaires that are designed to collect personal or financial information about a prospective senior who is considering the purchase of an annuity and would add compliance requirements related to prior notification of any insurance-annuity sales meeting if the prospective client is a senior.

Status (as of July 26, 2012): CA SB 1170 has passed the California Senate and, as of July 3, 2012, is before the CA House Appropriations Committee.

INDIANA: IN DOI Adopts NAIC Model Regulation on Use of Senior-Specific Certifications and Professional Designations in the Sale of Life Insurance & Annuities

The Indiana Department of Insurance has adopted the 2008 NAIC Model Regulation on the Use of Senior-Specific Certifications and Professional Designations, 760 IAC 1-79. The final rule was filed with the State Publisher on July 19, 2012, with the effective date of the rule thirty (30) days after publication.

MASSACHUSETTS: Changes to Insurance Producer Continuing Education Requirements

Massachusetts House Bill 300 provides that active membership by an individual insurance producer in the National Association of Financial Advisors – Massachusetts may be approved for up to three hours per year of continuing insurance education; however, not more than nine hours of continuing insurance education may be awarded to an individual insurance producer for membership in the organization during a thirty-six month reporting period. Credit for continuing insurance education pursuant to this subdivision may only be awarded to individual insurance producers, who are required to complete at least 45 hours of continuing education per 36-month reporting periods.

Status: MA HB 300 was scheduled to be heard before the MA House on July 18, 2012.

OREGON: Temporary Reporting Rule for Producer Licensing and Continuing Education

On June 19, 2012, the Oregon Department of Consumer and Business Services adopted temporary rule 836-071-0110, requiring Oregon-licensed insurance producers to submit electronically – to the extent possible – their license applications (and renewals) and continuing education records; additionally, non-Oregon-resident producers will have to provide background information electronically. There are electronic-filing requirements for CE vendors and fingerprint examination vendors as well. The temporary rule is effective as of August 1, 2012 and goes through January 25, 2013.

NEW JERSEY: Suitability Standards in Annuity Transactions

The New Jersey Department of Banking and Insurance – Office of Life & Health provided notice on June 4, 2012 that it proposes to repeal its current suitability rule, which was adopted in June 2011 and it didn’t include insurance producer training requirements. It will be replaced with N.J.A.C. 11:4-59A. The proposed new rule would bring New Jersey in line with the NAIC Suitability in Annuity Transactions Model Regulation.
Status: Comments to the proposed rule due no later than August 3, 2012.

If you have questions or comments, please contact Pam Heinrich at pmh@heinrich-law.com or pam@nafa.com, or call 414-333-0148.


NAFA, the National Association for Fixed Annuities, is a national trade association exclusively dedicated to promoting the awareness and understanding of fixed annuities. NAFA is the only association whose sole purpose is advocating for the fixed annuity product.

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