Important information for Arizona, Iowa, and Rhode Island Producers about the updated NAIC Suitability in Annuity Transactions Model Regulation. ------------------------------------------------- ------------------------------------------------ ------------------------------------------------
Keeping you in the know with information you can use.
December 22, 2020
Important Information for Arizona, Iowa, and Rhode Island Producers
The National Association of Insurance Commissioners (NAIC) has updated its Suitability in Annuity Transactions Model Regulation (#275) to add a best interest standard of care for the solicitation, recommendation, and issuance of annuity contracts. The new “Best Interest Rule” replaces NAIC’s older suitability standard and includes several substantive changes to both Producer obligations and supervising insurer obligations.
Under the rule, Producers have obligations to consumers related to care, conflict of interest, disclosure, and documentation for all annuity recommendations regardless of what carrier they do business with. These include new point-of-sale form requirements, Producer disclosures, and a documentation obligation. States that adopt the Best Interest Rule will require new NAIC training for the sale or recommendation of any annuity, as well as different forms related to the process for the sale or recommendation of a fixed index annuity (FIA).
Arizona, Iowa, and Rhode Island have adopted the Best Interest Rule—with Arizona and Iowa requiring compliance starting January 1, 2021, and Rhode Island requiring compliance starting April 1, 2021. Other states are in the process of adopting the rule for implementation later in 2021 (see “State Activity” below).
The following information outlines new requirements under the rule and provides resources to assist Producers in complying with the rule.
Training Requirements
New NAIC Training Requirement—A new state-approved training module (continuing education) must be taken by a state-approved vendor, such as Quest CE, RegEd, Success CE, or Kaplan. Access to approved vendors and information on training dates, times, and fees are available on the state Insurance Department websites. Producers must submit proof of their completed training to
Additional General Annuity Training CE—As states adopt the revised regulation, Producers doing business in those states will be required to complete additional general annuity training CE. The length of the additional training varies, depending on whether a Producer has completed the previous four-hour training—those who have are required to complete a one-hour General Annuity Training CE, while those who haven’t must complete a four-hour General Annuity Training CE before selling or soliciting any annuities. If training is not completed according to the timelines below, a new application will need to be submitted with a sign date after the training has been completed.
State One-Hour Course Four-Hour Course
and Iowa
Allowed if previous four-hour course completed before 1/1/2021 Required if previous four-hour course not completed before 1/1/2021
Allowed if previous four-hour course completed before 4/1/2021 Required if previous four-hour course not completed before 4/1/2021
Producer Obligations
Producers must act with a heightened standard of care in the solicitation and sale of annuities. This heightened standard of care is satisfied by meeting four obligations: care, disclosure, conflict of interest, and documentation. As part of this heightened standard of care, Producers must not place their financial interest ahead of the consumer’s interest.
Care—Producers must exercise reasonable diligence, care, and skill when making a recommendation by:
  Knowing the customer’s financial situation, insurance needs, and financial objectives.
Understanding available recommendation options after making a reasonable inquiry.
Having a reasonable basis to believe the recommended option effectively addresses the consumer’s financial situation, insurance needs, and financial objectives over the life of the product, as evaluated in light of the consumer profile information.
Communicating the basis or bases of the recommendation.
Producers must have a reasonable basis to believe the consumer would benefit from certain features of the annuity and must be able to communicate the basis of the recommendation. The Producer is not required to choose the product that simply has the lowest compensation structure but must consider the contract as a whole, including product features, riders, and subaccounts at the time of purchase.
If the sale involves a replacement contract, the Producer must consider:
  If the replacing product would substantially benefit the customer.
If the customer would incur surrender charges or lose benefits from their existing product.
If the customer would be subject to a new surrender charge period or increased fees from the new product.
Whether the customer has had another replacement in the last 60 months.
Disclosure—Under the new regulation, all applicants must be provided with an “Insurance Agent (Producer) Disclosure for Annuities” form. This new disclosure form, which must be submitted with all annuity applications, discloses information related to the method by which the Producer is compensated, the type of products the Producer is licensed to sell, and how many insurance companies the Producer is authorized to sell for. To help Producers comply with this requirement, Americo Financial Life and Annuity Insurance Company (Americo) and Ameritas Life Insurance Corp. (Ameritas) have provided a generic version of this disclosure form, which will be available on FireLight® starting December 31, 2020.
Conflict of Interest—Producers must identify and avoid, or reasonably manage and disclose, any financial interest they have in the sale of the annuity that a reasonable person would expect to influence the impartiality of a recommendation.
Documentation—Producers must document any recommendation made to a customer and the basis for the recommendation.
Updated Suitability Forms and Point-of-Sale Disclosure and Documentation
Americo has updated its existing suitability form in states that are adopting the new regulation. The updated suitability form for use in those states will be available on FireLight®, starting December 31, 2020. The existing Americo suitability form should still be used in states that have not adopted the new regulation.
Ameritas has updated its existing suitability form for use in all states as of February 1, 2021, regardless of whether a state has adopted the new regulation or not.
The existing “Replacement Comparison” form will be required for each replacement; however, the lookback time period has increased from 36 months to 60 months.
New point-of-sale documentation that must be completed and retained is outlined in the state regulation.
Applications signed prior to a state’s adoption date will be treated according to each carrier’s current requirements. Applications signed on or after a state’s adoption date must meet new state requirements prior to issue.
State Activity
Numerous other states are actively discussing adoption of this rule. We anticipate many more states will amend their suitability requirements to align with the NAIC revised Suitability in Annuity Transactions Model Regulation. As of December 22, 2020, the states that have proposed amendments to their suitability requirements, and the proposed effective dates, if any, are:
State Proposed Effective Date
Alabama TBD
Arkansas TBD
Delaware August 1, 2021
Idaho TBD
Kentucky July 1, 2021
Maine TBD
Massachusetts TBD
Michigan TBD
Ohio TBD
Additional Information
Americo Financial Suitability Form
Americo Insurance Agent (Producer) Disclosure for Annuities
Americo Announcement
Ameritas Financial Suitability Form
NAIC Insurance Agent (Producer) Disclosure for Annuities
NAIC Suitability in Annuity Transactions Model Regulation (#275)
If you need help obtaining a form or have questions about compliance with the Best Interest Rule, please contact the Legacy Sales Team at
800-395-1053, Ext. 4002, or Suitability Help Desk, Ext. 5819.
Unless otherwise specified, any person or entity referenced herein is not an affiliate of Ameritas or any of its affiliates.
20-600-36 (12/20)