The NAIC amended the Suitability in Annuity Transactions Model Regulation (Model Regulation) to incorporate a best interest standard of care. Under the new standard, producers must act in the client's best interest without placing the producer’s or insurer’s financial interest ahead of the client’s interest.
What is the best interest standard of care?
To act in the client’s best interest, producers must satisfy four specific obligations:
1. Care obligation
The care obligation includes four specific duties:
2. Disclosure obligation
The disclosure obligation requires you to discuss your role in the transaction, the scope of the products you are authorized to sell and how you will be compensated for your services.
3. Conflict of interest obligation
The conflict of interest obligation requires that you identify and avoid material conflicts of interest, such as having ownership of stock of the life insurance company issuing the annuity product you are recommending.
4. Documentation obligation
The documentation obligation requires that you make a written record of any recommendation and the basis for such recommendation.
When does the revised regulation go into effect?
The amended Model Regulation is adopted on a state-by-state basis. Below are the states that have adopted the Model Regulation to date and the applicable effective date. States that have not yet adopted the amended regulation will continue to follow the current Suitability Model.
What do you need to do?
To meet these obligations, we’ve updated our Client Financial Disclosure forms to help you capture all required client data, identify the annuity that best addresses the client’s unique needs and then document the basis for the recommendation.
We also have a new state-required disclosure form for you to complete with your clients to help describe the nature of your relationship. The form is required if you are licensed to sell Great American Life's commissionable and fee-based products.
If you completed a four-credit training course before the effective date, then you must complete one of the following within six months of the effective date:
If you did not complete a four-credit training course before the effective date, then you must do so prior to your first sale.