LIFE INSURANCE POLICIES AND ANNUITY CONTRACTS
41-1940. annuity consumer protections act. (1) Sections 41-1940 through 41-1943, Idaho Code, shall be known and may be cited as the "Annuity Consumer Protections Act."
(2) As used in the annuity consumer protections act:
(a) "Annuity" means an annuity that is an insurance product under state law that is individually solicited, whether classified as an individual or group annuity.
(b) "Best interest obligations" means that a producer, when making a recommendation of an annuity, shall act in the best interest of the consumer under the circumstances known at the time the recommendation is made without placing the producer’s or the insurer’s financial interest ahead of the consumer’s interest.
(c) "Cash compensation" means any discount, concession, fee, service fee, commission, sales charge, loan, override, or cash benefit received by a producer in connection with the recommendation or sale of an annuity from an insurer, intermediary, or directly from the consumer.
(d) "Consumer profile information" means information that is reasonably appropriate to determine whether a recommendation addresses the consumer’s financial situation, insurance needs, and financial objectives, including, at a minimum, the following:
(ii) Annual income;
(iii) Financial situation and needs, including debts and other obligations;
(iv) Financial experience;
(v) Insurance needs;
(vi) Financial objectives;
(vii) Intended use of the annuity;
(viii) Financial time horizon;
(ix) Existing assets or financial products, including investment, annuity, and insurance holdings;
(x) Liquidity needs;
(xi) Liquid net worth;
(xii) Risk tolerance, including but not limited to willingness to accept non-guaranteed elements in the annuity;
(xiii) Financial resources used to fund the annuity; and
(xiv) Tax status.
(e) "Continuing education provider" or "CE provider" means an individual or entity approved by the department to offer continuing education courses.
(f) "Contract owner" means the owner named in the annuity contract or the certificate holder in the case of a group annuity contract.
(g) "Determinable elements" means elements that are derived from processes or methods that are guaranteed at issue and that are not subject to company discretion, but where the values or amounts cannot be determined until some point after issue. These elements may include the premiums, credited interest rates (including any bonus), benefits, values, noninterest-based credits, charges, or elements of formulas used to determine any of these. An element is considered determinable only if it is calculated from underlying determinable elements or from both determinable and guaranteed elements.
(h) "FINRA" means the financial industry regulatory authority or succeeding agency.
(i) "Generic name" means a short title descriptive of the annuity contract being applied for or illustrated, such as "single premium deferred annuity."
(j) "Guaranteed elements" means the premiums, credited interest rates (including any bonus), benefits, values, noninterest-based credits, charges, or elements of formulas used to determine any of these that are promised and determined at issue. An element is considered guaranteed if all of the underlying elements that go into its calculation are guaranteed.
(k) "Insurance producer" or "producer" has the same meaning as provided in chapter 10, title 41, Idaho Code. For purposes of the annuity consumer protections act, "producer" includes an insurer where no producer is involved.
(l) "Insurer" means a company required to be licensed under the laws of this state to provide insurance products, including annuities.
(m) "Intermediary" means an entity contracted directly with an insurer or with another entity contracted with an insurer to facilitate the sale of the insurer’s annuities by producers.
(n) "Material conflict of interest" means a financial interest of the producer in the sale of an annuity that a reasonable person would expect to influence the impartiality of a recommendation. It does not include cash compensation or noncash compensation.
(o) "Noncash compensation" means any form of compensation that is not cash, including but not limited to health insurance, office rent, office support, and retirement benefits.
(p) "Non-guaranteed elements" means the premiums, credited interest rates including any bonus, benefits, values, dividends, noninterest-based credits, charges, or elements of formulas used to determine any of these that are subject to company discretion and that are not guaranteed at issue. An element is considered non-guaranteed if any of the underlying non-guaranteed elements are used in its calculation.
(q) "Recommendation" means advice provided by a producer to an individual consumer that was intended to result or does result in a purchase, exchange, or replacement of an annuity in accordance with that advice. It does not include general communication to the public, generalized customer services assistance or administrative support, general educational information and tools, prospectuses, or other product and sales material.
(r) "Replacement" means a transaction in which a new policy or contract is purchased and in which it is known or should be known to the proposing producer or insurer that, by reason of the transaction, an existing policy or contract has been or is to be:
(i) Lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing insurer, or terminated;
(ii) Converted to reduced paid-up insurance, continued as extended term insurance, or reduced in value by the use of nonforfeiture benefits or other policy values;
(iii) Amended to effect either a reduction in benefits or in the term for which coverage would remain in force or for which benefits would be paid;
(iv) Reissued with any reduction in cash value; or
(v) Used in a financed purchase.
(s) "SEC" means the United States securities and exchange commission.
(3) Unless otherwise specifically included, the annuity consumer protections act shall not apply to transactions involving:
(a) Contracts used to fund:
(i) An employee pension or welfare benefit plan that is covered by the employee retirement and income security act of 1974 (ERISA);
(ii) A plan described by sections 401(a), 401(k), 403(b), 408(k), or 408(p) of the Internal Revenue Code, as amended, if established or maintained by an employer;
(iii) A governmental or church plan defined in section 414 of the Internal Revenue Code, a governmental or church welfare benefit plan, or a deferred compensation plan of a state or local government or tax-exempt organization under section 457 of the Internal Revenue Code; or
(iv) A nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor;
(b) Settlements of or assumptions of liabilities associated with personal injury litigation or any dispute or claim resolution process; or
(c) Formal prepaid funeral contracts, also known as prepaid prearrangement sales or prearrangement sales contracts, as defined under section 54-1131(7), Idaho Code, and as regulated in chapter 11, title 54, Idaho Code.
(4) The director may promulgate rules implementing the provisions of the annuity consumer protections act for the protection of consumers in annuity transactions.
(5) Nothing in the annuity consumer protections act shall be construed to create or imply a private cause of action for a violation of the annuity consumer protections act or rules promulgated pursuant thereto.
[41-1940, added 2021, ch. 41, sec. 2, p. 110.]