7.9 Annuity Investments by Seniors
In 2004, the Florida legislature addressed the special needs of senior consumers with regard to annuity investments. (For purposes of this lesson with regard to annuity investments by seniors, "senior consumers" are defined as those individuals who are age 65 or older.) By law, the agent must make all reasonable efforts to obtain the consumer's age.
An agent is required to have reasonable grounds for believing that the recommendation is suitable for the senior based upon the facts disclosed by the senior regarding his/her investments, other insurance products, and his/her financial situation.
Are there certain standards and procedures that must be followed in order to make recommendations for annuity products to consumers age 65 and older?
Yes. The facts that must be collected from the senior consumer are:
1. Personal information, including the age and sex of the parties to the annuity and the ages and number of dependents;
2. tax status of the consumer;
3. investment objectives of the consumer;
4. source of funds being used to purchase the annuity;
5. the applicant's annual income;
6. intended use of the annuity;
7. the applicant's existing assets, including investment holdings;
8. the applicant's liquid net worth and liquidity needs;
9. the applicant's financial situation and needs;
10. the applicant's risk tolerance; and
11. such other information used or considered to be relevant by the insurance agent or insurer in making recommendations to the consumer regarding the purchase or exchange of an annuity contract.
This information must be collected on a form adopted by the Department and signed by the applicant and agent. If the senior consumer does not wish to provide all of this information, the agent must obtain from the senior consumer a signed verification form that he/she refuses to provide the requested information and may be limiting protections regarding the suitability of the sale.
An agent is required to maintain records relating to such transactions for five years (the insurer may maintain these records on behalf of the agent).
If a senior consumer is harmed by an insurance company or agent who violates the laws relating to the sale of annuity products, the Office may order an insurer to take reasonably appropriate corrective action, including rescission of the policy or contract and a full refund of the premiums paid or the accumulation value, whichever is greater.
The Department may order an insurance agent, MGA, or insurance agency that employs or contracts with an insurance agent to sell or solicit the sale of annuities to senior consumers to take reasonably appropriate corrective action.
Replacement or Exchange of an Annuity Contract
In transactions involving the replacement or exchange of an annuity contract, the agent must provide, on a form, information concerning differences between the existing annuity contract and the one being recommended, including:
1. a comparison of the benefits, terms, and limitations;
2. a comparison of any fees and charges;
3. a written basis for the recommended exchange, including the overall advantages and disadvantages to the consumer;
4. such other information considered relevant by the agent or insurer in making recommendations to the consumer.
Before the purchase or exchange of an annuity contract, an agent must also disclose that there may be tax consequences as a result of the purchase or exchange and that the applicant should consult a tax advisor for more information.
Continuing Education
There are specific continuing education requirements that must be fulfilled in order for an agent to continue selling annuities. An agent holding a license to solicit or sell life insurance in this state must complete a minimum of three (3) hours of continuing education on the subject of suitability in annuity and life insurance transactions. [Sec. 626.2815(3)(k), F.S.]
Each licensee except a title insurance agent must complete a 5-hour update course every 2 years which is specific to the license held by the licensee. The course must be developed and offered by providers and approved by the department. The content of the course must address all lines of insurance for which examination and licensure are required and include the following subject areas: insurance law updates, ethics for insurance professionals, disciplinary trends and case studies, industry trends, premium discounts, determining suitability of products and services, and other similar insurance-related topics the department determines are relevant to legally and ethically carrying out the responsibilities of the license granted. A licensee who holds multiple insurance licenses must complete an update course that is specific to at least one of the licenses held. Except as otherwise specified, any remaining required hours of continuing education are elective and may consist of any continuing education course approved by the department under this section.
