Code of Maine Rules
02 - DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION
031 - BUREAU OF INSURANCE
Chapter 917 - SUITABILITY IN ANNUITY TRANSACTIONS
Section 031-917-6 - Duties of Insurers and Producers

(1) Care Obligation. The producer, in making a recommendation, shall exercise reasonable diligence, care, and skill to:

(2) Subparagraph (1) requires a producer to make reasonable efforts to obtain consumer profile information from the consumer before the recommendation of an annuity.

(3) Subparagraph (1) requires a producer to consider the types of products the producer is authorized and licensed to recommend or sell that address the consumer's financial situation, insurance needs and financial objectives. This does not require analysis or consideration of any products outside the authority and license of the producer or other possible alternative products or strategies available in the market at the time of the recommendation. Producers shall be held to standards applicable to producers with similar authority and licensure.

(4) Subparagraph (1) requires a producer to consider the consumer's profile information, characteristics of the insurer, and product costs, rates, benefits, and features in determining whether an annuity would effectively address the consumer's financial situation, insurance needs and financial objectives. The level of importance given each factor may vary depending on the facts and circumstances of the particular case; however, no single factor may be considered in isolation.

(5) Subparagraph (1) requires a producer to have a reasonable basis to believe the consumer would benefit from certain features of the annuity, such as annuitization, death or living benefit, or other insurance-related features.

(6) The requirements of this paragraph apply to the particular annuity as a whole; the underlying subaccounts to which funds are allocated at the time of purchase or exchange of an annuity; and riders and similar product enhancements, if any.

(7) This paragraph does not necessarily require a producer to recommend the annuity with the lowest one-time or multiple occurrence compensation structure.

(8) Subparagraph (1) does not impose ongoing monitoring obligations on a producer. However, such an obligation might be separately owed under the terms of a fiduciary, consulting, investment advising, or financial planning agreement between the consumer and the producer.

(9) In the case of an exchange or replacement of an annuity, the producer shall consider the whole transaction, which includes taking into consideration whether:

(10) Nothing in this rule shall be construed to require a producer to obtain any license other than a producer license with the appropriate line of authority to sell, solicit, or negotiate insurance in this State, including but not limited to any securities license, in order to fulfill the duties and obligations contained in this rule; provided the producer does not give advice or provide services that are otherwise subject to securities laws or engage in any other activity requiring other professional licenses.

(11) The requirements under this subsection do not create a fiduciary obligation or relationship and only create a regulatory obligation as established in this rule.

(1) Before the recommendation or sale of an annuity, the producer shall prominently disclose to the consumer on a form substantially similar to a disclosure form as published by the Superintendent:

(2) Upon request of the consumer or the consumer's designated representative, the producer shall disclose:

(3) Before or at the time of the recommendation or sale of an annuity, the producer must have a reasonable basis to believe that 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, any annual fees, potential charges for and features of riders or other options of the annuity, limitations on interest returns, potential changes in non-guaranteed elements of the annuity, insurance and investment components, and market risk. The requirements of this section are intended to supplement and not replace any applicable disclosure requirements of Bureau of Insurance Rule Chapter 915: "Annuity Disclosure."

(1) Make a written record of any recommendation subject to this rule and the basis for the recommendation;

(2) If the consumer does not provide all requested consumer profile information, obtain a consumer signed statement on a form substantially similar to an acknowledgment form as published by the Superintendent documenting:

(3) Obtain a consumer signed statement on a form substantially similar to an acknowledgment form as published by the Superintendent, acknowledging that the annuity transaction is not recommended, if the consumer decides to enter into an annuity transaction that is not based on the producer's recommendation.

(1) No recommendation was made;

(2) A recommendation was made and was later found to have been prepared based on materially inaccurate information provided by the consumer;

(3) The consumer refused to provide relevant consumer profile information and the annuity transaction was not recommended; or

(4) The consumer decided to enter into an annuity transaction that was not based on a recommendation by the producer.

(1) The insurer shall establish and maintain reasonable procedures to inform its producers of the requirements of this rule and shall incorporate the requirements of this rule in to relevant producer training manuals;

(2) The insurer shall establish and maintain standards for insurance producer product training and shall maintain reasonable procedures to require its producers to comply with the requirements of section 7 of this rule;

(3) The insurer shall provide product-specific training and training materials which explain all material features of its annuity products to its producers;

(4) The insurer shall establish and maintain procedures for the review of each recommendation before issuance of an annuity that are designed to ensure that there is a reasonable basis for any determination that the recommended annuity would effectively address the particular consumer's financial situation, insurance needs, and financial objectives. 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 or other system may be designed to require additional review only of those transactions identified for additional review by the selection criteria;

(5) The insurer shall establish and maintain reasonable procedures to detect recommendations that are not in compliance with subsections 1, 2, 4, and 5. This may include, but is not limited to, confirmation of the consumer's consumer profile information, systematic customer surveys, producer and consumer interviews, confirmation letters, producer statements and attestations, and programs of internal monitoring. Nothing in this subparagraph prevents an insurer from complying with this subparagraph by applying sampling procedures, or by confirming the consumer profile information or other required information under this section after issuance or delivery of the annuity;

(6) The insurer shall establish and maintain reasonable procedures to assess, before issuance or delivery of an annuity, whether a producer has provided to the consumer the information required to be provided under this section;

(7) The insurer shall establish and maintain reasonable procedures to identify and address suspicious consumer refusals to provide consumer profile information;

(8) The insurer shall establish and maintain reasonable procedures to identify and eliminate any sales contests, sales 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 subparagraph are not intended to prohibit the receipt of health insurance, office rent, office support, retirement benefits or other employee benefits by employees as long as those benefits are not based upon the volume of sales of a specific annuity within a limited period of time; and

Drafting Note: The intent of Subparagraph (8) is to prohibit sales contests, sales quotas, bonuses, and non-cash compensation based on the sale of a particular product within a limited period of time, but not to prohibit general incentives regarding the sales of a company's products with no emphasis on any particular product.

(9) The insurer shall annually provide a written 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.

(1) Nothing in this subsection restricts an insurer from contracting for performance of a function (including maintenance of procedures) required under this subsection. An insurer is responsible for taking appropriate corrective action and may be subject to sanctions and penalties pursuant to section 8 of this rule regardless of whether the insurer contracts for performance of a function and regardless of the insurer's compliance with subparagraph (2) of this paragraph.

(2) An insurer's supervision system under this subsection shall include supervision of contractual performance under this subsection. This includes, but is not limited to, the following:

(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.

(1) Monitor the relevant conduct of the financial professional seeking to rely on paragraph A or the entity responsible for supervising the financial professional, such as the financial professional's broker-dealer or an investment adviser registered or licensed under federal securities laws, using information collected in the normal course of the insurer's business; and

(2) Provide to the entity responsible for supervising the financial professional seeking to rely on paragraph A, such as the financial professional's broker-dealer or investment adviser registered or licensed under federal securities laws, information and reports that are reasonably appropriate to assist that responsible entity to maintain its supervision system.

(1) A broker-dealer registered or licensed under federal securities laws or a registered representative of a broker-dealer;

(2) An investment adviser registered or licensed under federal securities laws or an investment adviser representative associated with the federally registered or licensed investment adviser; or

(3) A plan fiduciary under section 3(21) of the Employee Retirement Income Security Act of 1974 (ERISA) or fiduciary under section 4975(e)(3) of the Internal Revenue Code (IRC) or any amendments or successor statutes thereto.

Drafting Note: The requirement that a producer be "regulated and acting" as a broker-dealer, a registered representative of a broker-dealer, an investment adviser, an investment adviser representative or a plan fiduciary means that a producer who is not explicitly acting in compliance with the relevant comparable standards, as specified in Paragraph D below, is not eligible for this safe harbor and is subject to compliance with the requirements of this regulation.

(1) With respect to broker-dealers and registered representatives of broker-dealers, applicable SEC and FINRA rules pertaining to best interest obligations and supervision of annuity recommendations and sales, including, but not limited to, Regulation Best Interest and any amendments or successor regulations thereto;

(2) With respect to investment advisers registered under federal securities laws or investment adviser representatives, the fiduciary duties and all other requirements imposed on such investment advisers or investment adviser representatives by contract or under the Investment Advisers Act of 1940, including but not limited to, the Form ADV and interpretations; and

(3) With respect to plan fiduciaries or fiduciaries, the duties, obligations, prohibitions, and all other requirements attendant to such status under ERISA or the IRC and any amendments or successor statutes thereto.