Code of Massachusetts Regulations
211 CMR - DIVISION OF INSURANCE
Title 211 CMR 96.00 - Consumer Protection And Suitability In Annuity Transactions
Section 96.05 - Duties of Producers and Insurers

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

2. The requirements set forth in 211 CMR 96.05(1)(a)1. include making reasonable efforts to obtain consumer profile information from the consumer prior to the recommendation of an annuity.

3. The requirements set forth in 211 CMR 96.05(1)(a)1. require 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. The requirements set forth in 211 CMR 96.05(1) do not create a fiduciary obligation or relationship and only create a regulatory obligation as established by 211 CMR 96.00.

5. The consumer profile information, characteristics of the insurer, and product costs, rates, benefits and features are those factors generally relevant in making a determination whether an annuity effectively addresses the consumer's financial situation, insurance needs and financial objectives, but the level of importance of each factor under the care obligation set forth in 211 CMR 96.05(1)(a) may vary depending on the facts and circumstances of a particular case. However, each factor may not be considered in isolation.

6. The requirements set forth in 211 CMR 96.05(1)(a) include having a reasonable basis to believe the consumer would benefit from certain features of an annuity, such as the annuitization, death or living benefit or other insurance-related features

7. The requirements set forth in 211 CMR 96.05(1)(a) apply to the particular annuity as a whole and 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.

8. The requirements set forth in 211 CMR 96.05(1)(a) do not mean the annuity with the lowest one-time or multiple occurrence compensation structure will necessarily be recommended.

9. The requirements set forth in 211 CMR 96.05(1)(a) do not mean the producer has ongoing monitoring obligations under the care obligation set forth in 211 CMR 96.05(1)(a)1., although such an obligation may be separately owed under the terms of a fiduciary, consulting, investment advising or financial planning agreement between the producer and the consumer.

10. In the case of an exchange or replacement of an annuity, the producer shall consider the whole transaction, which includes taking into consideration whether

11. Nothing in 211 CMR 96.00 should 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 Massachusetts including, but not limited to, any securities license, in order to fulfill the duties and obligations set forth in 211 CMR 96.00; provided the producer does not give advice or provide services that are otherwise subject to securities laws or engages in any other activity requiring other professional licenses.

1. Prior to the recommendation of sale of an annuity, the producer shall prominently disclose to the consumer on a form designated by the Commissioner and posted on the Division's website at www.mass.gov/doi:

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

3. Prior to or at the time of the recommendation or sale of an annuity, the Producer shall have a reasonable basis to believe the consumer has been 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.

1. Make a written record of any recommendation and the basis for the recommendation subject to 211 CMR 96.00;

2. Obtain a consumer signed statement on a form designated by the Commissioner and posted on the Division's website at www.mass.gov/doi documenting:

3. Obtain a consumer signed statement on a form designated by the Commissioner and posted on the Division's website at www.mass.gov/doi acknowledging the annuity transaction is not recommended if a customer decides to enter into an annuity transaction that is not based on the producer's recommendation.

1. No recommendation is made;

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

3. A consumer refuses to provide relevant consumer profile information and the annuity transaction is not recommended; or

4. A consumer decides to enter into an annuity transaction that is not based on a recommendation of the producer.

1. The insurer shall establish and maintain procedures to inform its producers of the requirements of 211 CMR 96.00 and shall incorporate the requirements of 211 CMR 96.00 into relevant producer training manuals;

2. The insurer shall establish and maintain standards for producer product training and shall establish and maintain procedures to require its producers to comply with the requirements of 211 CMR 96.06;

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 prior to issuance of an annuity. The review procedures shall be designed 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. 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 review procedures may be designed to require additional review only of those transactions identified for additional review;

5. The insurer shall establish and maintain procedures to detect recommendations that are not in compliance with 211 CMR 96.05(1), (2), (4) and (5). In addition to investigating consumer complaints, these may include, but are not limited to, confirmation of the consumer's consumer profile information, systematic customer surveys, producer and consumer interviews, confirmation letters, producer statements or attestations and programs of internal monitoring. Insurers may comply with this requirement by applying sampling procedures, or by confirming the consumer profile information or other required information under 211 CMR 96.00 after issuance or delivery of the annuity;

6. The insurer shall establish and maintain procedures to assess, prior to 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. The insurer shall establish and maintain procedures to identify and address suspicious consumer refusals to provide consumer profile information;

8. The insurer shall establish and maintain 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. This is 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

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, designed to determine the effectiveness of the supervision system, the exceptions found, and corrective action taken or recommended, if any.

1. Insurers may contract for compliance with 211 CMR 96.05(3)(b). An insurer is responsible for taking appropriate corrective action and may be subject to sanctions and penalties pursuant to 211 CMR 96.07, regardless of whether the insurer contracts for performance of a function and regardless of the insurer's compliance with 211 CMR 96.05(3)(c)(2).

2. An insurer's supervision system under 211 CMR 96.05(3)(b) shall include supervision of contractual performance. 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 211 CMR 96.05(5)(a) or the entity responsible for supervising the financial professional, such as the financial professional's broker-dealer or investment adviser registered under federal or Massachusetts securities law 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 211 CMR 96.05(5)(a), such as the financial professional's broker-dealer or investment adviser registered under federal or Massachusetts securities law, information and reports that are reasonably appropriate to assist such entity to maintain its supervision system.

1. A broker-dealer registered under federal or Massachusetts securities laws or a registered representative of a broker-dealer;

2. An investment adviser registered under federal or Massachusetts securities laws or an investment adviser representative associated with the federal or Massachusetts registered 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.

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 or Massachusetts 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 or Massachusetts securities laws including, but not limited to, the Form ADV and interpretations; and

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