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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