OAR 836-080-0180
Duties of Insurers and of Insurance Producers
(1)
As used in this rule, “FINRA” means the Financial Industry Regulatory Authority or a succeeding agency.(2)
In addition to the disclosure requirements of OAR 836-051-0900 (Purpose; Authority) to 836-051-0925 (Trade Practice Regulation), in recommending to a consumer the purchase of an annuity or the exchange of an annuity that results in another insurance transaction or series of insurance transactions, the insurance producer, or the insurer where no insurance producer is involved, shall have reasonable grounds for believing that the recommendation is suitable for the consumer on the basis of the facts disclosed by the consumer as to his or her investments and other insurance products and as to his or her financial situation and needs, including the consumer’s suitability information, and that there is a reasonable basis to believe all of the following:(a)
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, potential charges for and features of riders, limitations on interest returns, insurance and investment components and market risk;(b)
The consumer would benefit from certain features of the annuity, such as tax deferred growth, annuitization or death or living benefit;(c)
The particular annuity as a whole, the underlying subaccounts to which funds are allocated at the time of purchase or exchange of the annuity, and riders and similar product enhancements, if any, are suitable (and in the case of an exchange or replacement, the transaction as a whole is suitable) for the particular consumer based on his or her suitability information; and(d)
In the case of an exchange or replacement of an annuity, the exchange or replacement is suitable including taking into consideration whether:(A)
The consumer will incur a surrender charge, be subject to the commencement of a new surrender period, lose existing benefits (such as death, living or other contractual benefits), or be subject to increased fees, investment advisory fees or charges for riders and similar product enhancements;(B)
The consumer would benefit from product enhancements and improvements; and(C)
The consumer has had another annuity exchange or replacement and, in particular, an exchange or replacement within the preceding 36 months.(3)
Prior to the execution of a purchase, exchange or replacement of an annuity resulting from a recommendation, an insurance producer, or an insurer where no insurance producer is involved, shall make reasonable efforts to obtain the consumer’s suitability information(4)
Except as permitted under section (3) of this rule, an insurer shall not issue an annuity recommended to a consumer unless there is a reasonable basis to believe the annuity is suitable based on the consumer’s suitability information.(5)
Intentionally left blank —Ed.(a)
Except as provided under subsection (b) of this section, neither an insurance producer, nor an insurer, shall have any obligation to a consumer under subsection A or C related to any annuity transaction if:(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 suitability 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 insurer or the insurance producer.(b)
An insurer’s issuance of an annuity subject to subsection (a) of this section shall be reasonable under all the circumstances actually known to the insurer at the time the annuity is issued.(6)
An insurance producer or, where no insurance producer is involved, the responsible insurer representative, shall at the time of sale:(a)
Make a record of any recommendation subject to section (2) of this rule;(b)
Obtain a customer signed statement documenting a customer’s refusal to provide suitability information, if any; and(c)
Obtain a customer signed statement acknowledging that an annuity transaction is not recommended if a customer decides to enter into an annuity transaction that is not based on the insurance producer’s or insurer’s recommendation.(7)
Intentionally left blank —Ed.(a)
An insurer shall establish a supervision system that is reasonably designed to achieve the insurer’s and its insurance producers’ compliance with OAR 836-080-0170 (Statutory Authority; Purpose) to 836-080-0190 (Annuity Sales; Disclosure Not a Defense). The supervision system must include but need not be limited to, the following:(A)
The insurer shall maintain reasonable procedures to inform its insurance producers of the requirements of OAR 836-080-0170 (Statutory Authority; Purpose) to 836-080-0190 (Annuity Sales; Disclosure Not a Defense) and shall incorporate the requirements of OAR 836-080-0170 (Statutory Authority; Purpose) to 836-080-0190 (Annuity Sales; Disclosure Not a Defense) into relevant insurance producer training manuals;(B)
The insurer shall establish standards for insurance producer product training and shall maintain reasonable procedures to require its insurance producers to comply with the requirements of OAR 836-080-0185 (Compliance Mitigation; Penalties);(C)
The insurer shall provide product-specific training and training materials that explain all material features of its annuity products to its insurance producers;(D)
The insurer shall maintain procedures to review each recommendation prior to issuance of an annuity that are designed to ensure that there is a reasonable basis to determine that a recommendation is suitable. The 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. 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 maintain a reasonable procedure to detect recommendations that are not suitable. The procedure may include, but need not be limited to, confirmation of consumer suitability information, systematic customer surveys, interviews, confirmation letters and programs of internal monitoring. Nothing in this paragraph prevents an insurer from complying with this paragraph by applying sampling procedures, or by confirming suitability information after issuance or delivery of the annuity; and(F)
The insurer annually shall provide a 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.(b)
Intentionally left blank —Ed.(A)
Nothing in this section restricts an insurer from contracting for performance of a function (including maintenance of procedures) required under subsection (a) of this section. An insurer is responsible for taking appropriate corrective action and may be subject to sanctions and penalties under OAR 836-080-0185 (Compliance Mitigation; Penalties) regardless of whether the insurer contracts for performance of a function and regardless of the insurer’s compliance with subparagraph (B) of this paragraph.(B)
An insurer’s supervision system under subsection (a) of this section shall include supervision of contractual performance under this subsection. The supervision must include, but is not limited to, the following:(i)
Monitoring and, as appropriate, conducting audits to assure that the contracted function is properly performed; and(ii)
Annually obtaining a certification from a senior manager who has responsibility for the contracted function that the manager has a reasonable basis to represent, and does represent, that the function is properly performed.(C)
An insurer is not required to include in its system of supervision an insurance producer’s recommendations to consumers of products other than the annuities offered by the insurer.(8)
An insurance producer shall not dissuade, or attempt to dissuade, a consumer from:(a)
Truthfully responding to an insurer’s request for confirmation of suitability information;(b)
Filing a complaint; or(c)
Cooperating with the investigation of a complaint.(9)
Intentionally left blank —Ed.(a)
Sales made in compliance with FINRA requirements pertaining to suitability and supervision of annuity transactions shall satisfy the requirements under OAR 836-080-0170 (Statutory Authority; Purpose) to 836-080-0190 (Annuity Sales; Disclosure Not a Defense). This subsection applies to FINRA broker-dealer sales of variable annuities and fixed annuities if the suitability and supervision is similar to those applied to variable annuity sales. However, nothing in this subsection shall limit the director’s ability to investigate and enforce the provisions of 836-080-0170 (Statutory Authority; Purpose) to 836-080-0190 (Annuity Sales; Disclosure Not a Defense).(b)
In order for subsection (b) to apply, an insurer shall:(A)
Monitor the FINRA member broker-dealer using information collected in the normal course of an insurer’s business; and(B)
Provide to the FINRA member broker-dealer information and reports that are reasonably appropriate to assist the FINRA member broker-dealer to maintain its supervision system.
Source:
Rule 836-080-0180 — Duties of Insurers and of Insurance Producers, https://secure.sos.state.or.us/oard/view.action?ruleNumber=836-080-0180.