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Retirement Planning > Retirement Investing > Annuity Investing

Florida Senate extends annuity law to all ages

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The Florida State Senate has unanimously passed a law that would extend annuity suitability requirements to all ages, not just seniors age 65 and older. The bill also seeks to amend the law as it pertains to the unconditional refund period and impose stricter criteria when an agent recommends the exchange or replacement of an annuity.

This latest regulation incorporates the NAIC’s 2010 Suitability in Annuity Transaction Model Regulation, which details consumer protections when selling annuities to the public. Under the law, an agent or insurer must ‘have reasonable grounds for believing the recommendation is suitable for the consumer, based on the consumer’s suitability information.” Agents also would be required to record all recommendations made to a consumer and refrain from persuading a consumer to make untrue statements during the suitability fact-finding process.

The proposed bill had been approved previously by the State Legislature by a unanimous vote and now awaits approval by the governor. If signed into law, the legislation, CS/CS/SB 166 – Annuities, would take effect October 1.

According to a spokesperson for the Florida Office of Insurance Regulation, a similar bill was passed by the House of Representatives in 2012, but was unable to gain approval from the Senate at that time. In February of last year, Florida’s Insurance Commissioner, Kevin McCarty, issued a statement in support of the proposed legislation.

In addition to broadening the suitability requirements to all ages, the act would change the unconditional refund period from the current 14 days to 21 days for all purchases of fixed and variable annuities. In addition to stating that refund period on the cover page to an annuity policy, the cover page must also state in bold, 12-point type:

  • “Please be aware that the purchase of an annuity contract is a long-term commitment and may restrict access to your money.”
  • “It is important that you understand how the bonus feature of your contract works. Please refer to your contract for further details.”
  • “The interest rate applied to your contract may be subject to change periodically and may increase or decrease, subject to certain interest rate guarantees described in your contract.”
  • “A [prospectus and contract summary] buyer’s guide is required to be given to you.”

Further, the bill would require an enhanced suitability review when recommending an exchange or replacement of an annuity. When proposing such a transaction, an insurance agent or insurer must consider these factors:

  • Will the consumer incur a surrender charge; be subject to the commencement of a new surrender period; have to pay increased fees (including investment advisory fees or charges for riders or other similar product enhancements) or lose existing benefits (death, living or other contractual benefits);
  • Does the consumer benefit from product enhancements and improvements; and
  • Has the consumer undertaken another annuity exchange or replacement, particularly within the past 36 months.

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