An insurer may not issue a recommended annuity unless it has a reasonable basis to believe the annuity fits the consumer’s financial situation, needs, and objectives, and it must maintain a supervision system with training, review, monitoring, reporting, and corrective-action procedures.
Sec. 1115.052. SUPERVISION SYSTEM. (a) Except as provided in Section 1115.0506, an insurer may not issue an annuity recommended to a consumer unless there is a reasonable basis to believe the annuity would effectively address the consumer's financial situation, insurance needs, and financial objectives based on the consumer's consumer profile information. (b) Each insurer shall establish and maintain a supervision system that is reasonably designed to achieve the insurer's and the insurer's agent's compliance with this chapter, including: (1) establishing and maintaining reasonable procedures to inform the insurer's agents of the requirements of this chapter and incorporating the requirements of this chapter into relevant agent training manuals; (2) establishing and maintaining standards for agent product training and establishing and maintaining reasonable procedures to require the insurer's agents to comply with the requirements of Section 1115.056; (3) providing product-specific training and training materials that explain all material features of the insurer's annuity products to the insurer's agents; (4) establishing and maintaining procedures to review each recommendation electronically, physically, or otherwise before the issuance of an annuity that: (A) are designed to ensure that there is a reasonable basis to determine that the recommended annuity would effectively address the consumer's financial situation, insurance needs, and financial objectives; and (B) may: (i) include the application of a screening system to identify selected transactions for additional review; and (ii) be designed to require additional review only of those transactions identified for additional review by the selection criteria; (5) establishing and maintaining reasonable procedures, such as confirmation of consumer profile information, systematic customer surveys, agent and consumer interviews, confirmation letters, agent statements or attestations, and programs of internal monitoring, to detect recommendations that are not in compliance with Sections 1115.0505 through 1115.051 and Sections 1115.0521 and 1115.054, which may include applying sampling procedures or confirming consumer profile information after the issuance or delivery of the annuity; (6) establishing and maintaining reasonable procedures to assess, before or on issuance or delivery of an annuity, whether an agent has provided to the consumer the information required to be provided under this subchapter; (7) establishing and maintaining reasonable procedures to identify and address suspicious consumer refusals to provide consumer profile information; (8) establishing and maintaining reasonable procedures to identify and eliminate sales contests, sales quotas, bonuses, or noncash compensation that are based on the sale of specific annuities within a limited period of time; and (9) annually providing a written report to the insurer's senior management, including to the senior manager responsible for audit functions, that details a review, with appropriate testing, reasonably designed to determine the effectiveness of the supervision system, the exceptions found, and any corrective action taken or recommended. (b-1) Subsection (b)(8) does not prohibit the receipt by employees of health insurance, office rent, office support, retirement benefits, or other employee benefits so long as those benefits are not based on the volume of sales of a specific annuity within a limited period of time. (c) This subsection and Subsection (c-1) do not prohibit an insurer from contracting for the performance of a function, including maintenance of procedures, required by Subsection (b). An insurer is responsible for taking appropriate corrective action and may be subject to sanctions and penalties under Section 1115.102 regardless of whether the insurer contracts for performance of a function and regardless of whether the insurer complies with Subsection (c-1). (c-1) An insurer's supervision system under Subsection (b) must include the supervision of contractual performance under this subsection that includes, at a minimum: (1) annually obtaining certification that complies with Section 1115.053 from a senior manager who represents that the contracted function is properly performed; and (2) monitoring and, as appropriate, conducting audits to ensure that the contracted function is properly performed. (d) An insurer is not required by this section to include in the supervision system: (1) an agent's recommendations to consumers of products other than the annuities offered by the insurer; or (2) consideration of or comparison to options available to the agent or compensation relating to those options other than annuities or other products offered by the insurer. (e) Repealed by Acts 2021, 87th Leg., R.S., Ch. 262 (H.B. 1777), Sec. 18(3), eff. September 1, 2021. Added by Acts 2007, 80th Leg., R.S., Ch. 736 (H.B. 2761), Sec. 1, eff. September 1, 2007. Amended by: Acts 2011, 82nd Leg., R.S., Ch. 1156 (H.B. 2277), Sec. 10, eff. September 1, 2011. Acts 2021, 87th Leg., R.S., Ch. 262 (H.B. 1777), Sec. 10, eff. September 1, 2021. Acts 2021, 87th Leg., R.S., Ch. 262 (H.B. 1777), Sec. 18(3), eff. September 1, 2021.