An agent making an annuity recommendation must use reasonable care, gather and consider key consumer and product information, and explain the basis for the recommendation.
Sec. 1115.0513. CARE OBLIGATION. (a) In making a recommendation, an agent shall exercise reasonable diligence, care, and skill to: (1) obtain consumer profile information from the consumer before making the recommendation of an annuity; (2) know the consumer's financial situation, insurance needs, and financial objectives; (3) understand the available recommendation options available to the agent; (4) consider the types of products the agent is authorized and licensed to recommend or sell that address the consumer's financial situation, insurance needs, and financial objectives; (5) have a reasonable basis to believe the recommendation addresses the consumer's financial situation, insurance needs, and financial objectives over the life of the product, in light of the consumer profile information; (6) have a reasonable basis to believe the consumer would benefit from certain features of the annuity, such as annuitization, a death or living benefit, or other insurance-related feature; and (7) communicate the basis of the recommendation. (b) Subsection (a) does not require: (1) analysis or consideration of a product outside the authority and license of the agent; (2) analysis or consideration of a product or strategy that is an alternative to an annuity; (3) recommendation of the annuity with the lowest one-time or multiple occurrence compensation structure; or (4) ongoing monitoring of the consumer's financial situation. (c) The agent shall consider consumer profile information, characteristics of the insurer, and product costs, rates, benefits, and features in determining whether an annuity effectively addresses the consumer's financial situation, insurance needs, and financial objectives. The agent may place varying levels of importance on each of those factors based on the facts and circumstances of a particular case, but may not consider one factor in isolation. (d) In the case of an exchange or replacement of an annuity, the agent shall consider the whole transaction, including whether: (1) the consumer will incur a surrender charge, be subjected 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; (2) the replacing product would substantially benefit the consumer in comparison to the replaced product over the life of the product; and (3) the consumer has had an annuity exchange or replacement in the preceding 60 months. (e) This section applies to an annuity as a whole, including: (1) underlying subaccounts to which money is allocated at the time of the purchase or exchange of an annuity; and (2) any riders and similar product enhancements. (f) An agent shall be held to standards applicable to an agent with similar authority and licensure with respect to the requirements of this section. This section does not create a fiduciary obligation or relationship and only creates a regulatory obligation. This section does not affect any ongoing monitoring obligation an agent may have under a fiduciary, consulting, investment advising, or financial planning agreement between the consumer and the agent. Added by Acts 2021, 87th Leg., R.S., Ch. 262 (H.B. 1777), Sec. 9, eff. September 1, 2021.