Rhode Island Code of Regulations
Title 230 - Department of Business Regulation
Chapter 20 - Insurance
Subchapter 25 - LIFE AND ANNUITIES
Part 1 - Suitability in Annuity Transactions
Section 230-RICR-20-25-1.6 - Duties of Insurers and Producers

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

b. The requirements under § 1.6(A)(1)(a) of this Part include making reasonable efforts to obtain consumer profile information from the consumer prior to the recommendation of an annuity.

c. The requirements under § 1.6(A)(1)(a) of this Part 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.

d. The requirements under § 1.6(A) of this Part do not create a fiduciary obligation or relationship and only create a regulatory obligation as established in this Regulation.

e. 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 of § 1.6(A) of this Part may vary depending on the facts and circumstances of a particular case. However, each factor may not be considered in isolation.

f. The requirements under § 1.6(A)(1)(a) of this Part include having 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.

g. The requirements under § 1.6(A)(1)(a) of this Part 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 producer enhancements, if any.

h. The requirements under § 1.6(A)(1)(a) of this Part do not mean the annuity with the lowest one (1) time or multiple occurrence compensation structure shall necessarily be recommended.

i. The requirements under § 1.6(A)(1)(a) of this Part do not mean the producer has ongoing monitoring obligations under the care obligation under § 1.6(A)(1) of this Part, although such an obligation may be separately owed under the terms of a fiduciary, consulting, investment advising or financial planning agreement between the consumer and the producer.

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

k. Nothing in this Regulation 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 this State, including but not limited to any securities license, in order to fulfill the duties and obligations contained in this Regulation; 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.

a. Prior to the recommendation or sale of an annuity, the producer shall prominently disclose to the consumer on a form substantially similar to Appendix A which has been included in a bulletin issued for that purpose and available on the Department's website:

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

c. 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 (the requirements of § 1.6(A)(2)(b) of this Part are intended to supplement and not replace the disclosure requirements of Part 6 of this Subchapter;

a. Make a written record of any recommendation and the basis for the recommendation subject to this Regulation.;

b. Obtain a consumer signed statement on a form substantially similar to Appendix B which has been included in a bulletin issued for that purpose and available on the Department's website documenting:

c. Obtain a consumer signed statement on a form substantially similar to Appendix C which has been included in a bulletin issued for that purpose and available on the Department's website 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.

a. No recommendation is made;

b. A recommendation was made and was later found to have been prepared 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.

a. The insurer shall establish and maintain reasonable procedures to inform its producers of the requirements of this Part and shall incorporate the requirements of this Part into relevant producer training manuals;

b. The insurer shall establish and maintain standards for producer product training and shall maintain reasonable procedures to require its producers to comply with the requirements of § 1.7 of this Part;

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

d. The insurer shall establish and maintain procedures for the review of each recommendation prior to issuance of an annuity that are 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 an electronic or other system may be designed to require additional review only of those transactions identified for additional review by the selection criteria;

e. The insurer shall establish and maintain reasonable procedure to detect recommendations that are not in compliance with §§ 1.6(A), (B), (D) and (E) of this Part. 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 or attestations and programs of internal monitoring. Nothing in § 1.6(C)(2)(e) of this Part prevents an insurer from complying with § 1.6(C)(2)(e) of this Part by applying sampling procedure, or by confirming the consumer profile information or other required information under § 1.6 of this Part after issuance or delivery of the annuity;

f. The insurer shall establish and maintain reasonable 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 § 1.6 of this Part;

g. The insurer shall establish and maintain reasonable procedures to identify and address suspicious consumer refusals to provide consumer profile information;

h. 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 § 1.6(C)(2)(h) of this Part 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

i. 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.

a. Nothing in §§ 1.6(C)(2) or (3) of this Part restricts an insurer from contracting for performance of a function (including maintenance of procedures) required under § 1.6(C)(2) of this Part. An insurer is responsible for taking appropriate corrective action and may be subject to sanctions and penalties pursuant to § 1.8 of this Part regardless of whether the insurer contracts for performance of a function and regardless of the insurer's compliance with § 1.6(C)(3) (b) of this Part below.

b. An insurer's supervision system under § 1.6(C)(2) of this Part shall include supervision of contractual performance under § 1.6(C)(3) of this Part. This includes, but is not limited to, the following:

a. A producer's recommendations to consumers of products other than the annuities offered by the insurer, or

b. 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.

a. Monitor the relevant conduct of the financial professional seeking to rely on § 1.6(C)(1) of this Part or the entity responsible for supervising the financial professional, such as the financial professional's broker-dealer or an investment adviser registered under Federal securities laws using information collected in the normal course of an insurer's business; and

b. Provide to the entity responsible for supervising the financial professional seeking to rely on § 1.6(E)(1) of this Part, such as the financial professional's broker-dealer or an investment adviser registered under Federal securities laws information and reports that are reasonably appropriate to assist such entity to maintain its supervision system.

a. A broker-dealer registered under Federal or State securities laws or a registered representative of a broker-dealer;

b. An investment adviser registered under Federal securities laws or an investment adviser representative associated with the Federal registered investment adviser; or

c. A plan fiduciary under § 3(21) of the Employee Retirement Income Security Act of 1974 (ERISA), Pub. Law 93-406, or fiduciary under §4975(e)(3) of the Internal Revenue Code (IRC) or any amendments or successor statutes thereto.

a. 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;

b. 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, 15 U.S.C. § 80b as amended, or R.I. Gen. Laws Chapter 7-11 including but not limited to, the Form ADV and interpretations; and

c. 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.