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H0117...........................................................by BUSINESS INSURANCE - ANNUITY SALES - Adds to existing law to set forth requirements for recommendations of annuity sales involving senior consumers; to define "senior consumer"; to require that certain information be obtained; to release insurance producers and insurers from obligations based upon certain actions; to exempt certain recommendations from application; to provide for the promulgation of rules; and to provide that no private cause of action is created. 02/04 House intro - 1st rdg - to printing 02/07 Rpt prt - to Bus 02/18 Rpt out - rec d/p - to 2nd rdg 02/21 2nd rdg - to 3rd rdg 02/23 3rd rdg - PASSED - 64-6-0 AYES -- Anderson, Andrus, Barraclough, Bastian, Bayer, Bedke, Bell, Bilbao, Black, Block, Boe, Bolz, Bradford, Chadderdon, Collins, Crow, Deal, Denney, Edmunson, Ellsworth, Eskridge, Field(18), Field(23), Garrett, Hart, Henbest, Henderson, Jaquet, Jones, Kemp, Lake, LeFavour, Loertscher, Martinez, Mathews, McGeachin, McKague, Miller, Mitchell, Moyle, Nielsen, Nonini, Pasley-Stuart, Pence, Raybould, Ring, Ringo, Roberts, Rusche, Rydalch, Sayler, Schaefer, Shepherd(2), Shepherd(8), Shirley, Skippen, Smith(30), Smylie, Snodgrass, Stevenson, Trail, Wills, Wood, Mr. Speaker NAYS -- Barrett, Cannon, Clark, Harwood, Sali, Smith(24) Absent and excused -- None Floor Sponsor - Nonini Title apvd - to Senate 02/24 Senate intro - 1st rdg - to Com/HuRes 03/04 Rpt out - rec d/p - to 2nd rdg 03/07 2nd rdg - to 3rd rdg 03/11 3rd rdg - PASSED - 32-0-2, 1 vacancy AYES -- Andreason, Brandt, Broadsword, Bunderson, Burkett, Burtenshaw, Cameron, Coiner, Compton, Corder, Darrington, Davis, Gannon, Geddes, Goedde, Jorgenson, Kelly, Keough, Langhorst, Little, Lodge, Malepeai, Marley, McGee, McKenzie, Pearce, Richardson, Schroeder, Stegner, Stennett, Werk, Williams NAYS -- None Absent and excused -- Hill, Sweet, (District 21 seat vacant) Floor Sponsor - Cameron Title apvd - to House 03/14 To enrol 03/15 Rpt enrol - Sp signed 03/16 Pres signed 03/17 To Governor 03/21 Governor signed Session Law Chapter 76 Effective: 07/01/05
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]] Fifty-eighth Legislature First Regular Session - 2005 IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 117 BY BUSINESS COMMITTEE 1 AN ACT 2 RELATING TO ANNUITY SALES; AMENDING CHAPTER 19, TITLE 41, IDAHO CODE, BY THE 3 ADDITION OF A NEW SECTION 41-1940, IDAHO CODE, TO SET FORTH REQUIREMENTS 4 FOR RECOMMENDATIONS OF ANNUITY SALES INVOLVING SENIOR CONSUMERS, TO DEFINE 5 "SENIOR CONSUMER," TO REQUIRE THAT CERTAIN INFORMATION BE OBTAINED, TO 6 RELEASE INSURANCE PRODUCERS AND INSURERS FROM OBLIGATIONS BASED UPON SPEC- 7 IFIED ACTIONS BY SENIOR CONSUMERS, TO EXEMPT CERTAIN RECOMMENDATIONS FROM 8 APPLICATION, TO PROVIDE FOR THE PROMULGATION OF RULES AND TO PROVIDE THAT 9 NO PRIVATE CAUSE OF ACTION IS CREATED. 10 Be It Enacted by the Legislature of the State of Idaho: 11 SECTION 1. That Chapter 19, Title 41, Idaho Code, be, and the same is 12 hereby amended by the addition thereto of a NEW SECTION, to be known and des- 13 ignated as Section 41-1940, Idaho Code, and to read as follows: 14 41-1940. SUITABILITY OF ANNUITY SALES TO SENIOR CONSUMERS. (1) In recom- 15 mending to a senior consumer the purchase of an annuity or the exchange of an 16 annuity that results in an insurance transaction or a series of insurance 17 transactions, the insurance producer, or the insurer where no producer is 18 involved, shall have reasonable grounds for believing that the recommendation 19 is suitable for the senior consumer on the basis of the facts disclosed by the 20 senior consumer as to the senior consumer's investments and other insurance 21 products and as to the senior consumer's age, financial situation and needs. 22 (2) For purposes of this section, "senior consumer" means a person sixty- 23 five (65) years of age or older. In the event of a joint purchase by more than 24 one (1) party, the purchaser will be considered a senior consumer if any of 25 the parties is sixty-five (65) years of age or older. 26 (3) Prior to the execution of a purchase or exchange of an annuity 27 resulting from a recommendation, an insurance producer, or an insurer where no 28 producer is involved, shall make reasonable efforts to obtain information con- 29 cerning: 30 (a) The senior consumer's financial status; 31 (b) The senior consumer's tax status; 32 (c) The senior consumer's investment objectives; and 33 (d) Such other information used or considered to be reasonable by the 34 insurance producer, or the insurer where no producer is involved, in mak- 35 ing recommendations to the senior consumer. 36 (4) Neither an insurance producer, nor an insurer where no producer is 37 involved, shall have any obligation to a senior consumer under this section 38 related to any recommendation if a senior consumer: 39 (a) Refuses to provide relevant information requested by the insurer or 40 insurance producer; 41 (b) Decides to enter into an insurance transaction that is not based upon 42 a recommendation of the insurer or insurance producer; or 43 (c) Fails to provide complete and accurate information. 2 1 (5) This section shall not apply to recommendations involving: 2 (a) Direct response solicitations where there is no recommendation based 3 upon information collected from the senior consumer; 4 (b) Contracts used to fund employee retirement or benefit plans estab- 5 lished or maintained by an employer; 6 (c) Settlements of or assumptions of liabilities associated with personal 7 injury litigation or any dispute or claim resolution process; or 8 (d) Contracts or transactions exempted pursuant to rules promulgated by 9 the director, where the director has determined the protections of this 10 law are not necessary. 11 (6) The director may promulgate rules pursuant to this section for the 12 protection of senior consumers in annuity transactions. 13 (7) Nothing in this section shall be construed to create or imply a pri- 14 vate cause of action for a violation of this section or rules promulgated pur- 15 suant to this section.
STATEMENT OF PURPOSE RS 14426 This proposal requires that insurance producers (agents and brokers), or companies where no producer is used, who recommend annuity transactions to senior consumers take reasonable steps to determine that the annuity is a suitable investment for the senior purchaser. An annuity is an insurance product that generally involves upfront payments in exchange for guaranteed periodic payments beginning at some later date. The payments typically are guaranteed to continue for the life of the purchaser. If the annuity purchaser needs access to the funds before the annuity matures, the annuity contract generally imposes surrender charges that gradually decline based on the length of time the annuity is held. Surrender charges, especially early in the annuity term, are often significant and can result in a financial loss to the consumer if the consumer needs immediate access to funds. The purpose of this proposal is to address situations that the Department has encountered where elderly consumers with current income needs have been sold annuities that provided no immediate benefit and tied up the senior consumer's retirement savings for years. The elderly consumer is then left with the choice of pulling needed funds out of the annuity, and losing a portion of their savings in surrender charges, or struggling to get by until the annuity matures. In many of these cases, the annuity sold the elderly consumer was plainly inappropriate given the consumer's age, financial situation and income needs. This proposal simply requires that an insurance producer recommending an annuity to a senior consumer have reasonable grounds to believe that the annuity is a suitable investment for the senior client given the client's age, financial situation and income needs. If a senior consumer does not wish to provide information to the producer or provides inaccurate information, or does not enter into the transaction based on a producer's recommendation, then the producer is under no obligation to make a suitability determination for that consumer. FISCAL IMPACT None. CONTACT Name: Jim Genetti Agency: Insurance, Dept. of Phone: 334-4340 Statement of Purpose/Fiscal Impact H 117