Consumers’ financial interest comes first in annuity sales

A new law updates best interest standards in annuity sales to help protect consumers, especially older adults. Insurers may not put their financial interests ahead of the consumer.

When recommending an annuity, insurance agents should follow revised National Association of Insurance Commissioners standards, satisfying four conduct obligations: care, disclosure, conflict of interest and documentation. Under the law:

• producers have a care obligation to know their customer and have a reasonable basis for their recommendation;

• producers have an obligation to disclose their licensing and how they will be compensated for the sale. For example if they will be paid by commission or an asset management fee;

• producers must avoid and disclose conflict of interest, including sales incentives such as quotas, bonuses or limited time contests; and

• producers have an obligation to document the basis of their recommendations.

The new law also includes a requirement for additional training for current license holders.

Rep. Carlie Kotyza-Witthuhn (DFL-Eden Prairie) and Sen. Gary Dahms (R-Redwood Falls) sponsor the law.

Most provisions take effect Jan. 1, 2023.

HF4394/SF4108*/CH84

SF4108* / HF4394 / CH84