If you are contracted with carriers that offer annuities, chances are you have seen emails and received written notices about mandatory continuing education. You may have wondered if these requirements really apply to you — after all, you've never had to fulfill special education requirements in the past — and if so, you might wonder further, what do you need to do?
Training requirements
The first thing to know is that the rules are changing – so yes, there are new requirements this year. In March 2010, the NAIC published its 2010 Suitability in Annuity Transactions Model Regulation, which imposed new training requirements on producers. Certain states are now beginning to put these requirements into place, as are some carriers on a nationwide basis.
As of Jan. 1, 2011, Iowa, Oklahoma, and Wisconsin have adopted the new training requirements. In addition, Colorado, the District of Columbia, Michigan, New Jersey, New York, Ohio, Oregon, Rhode Island, and West Virginia have pending legislation and are in the process of adopting the regulations. And again, some carriers have chosen to adopt the training requirements for their producers on a nationwide basis, so pay attention to those notices you receive from your carriers.
Under the model regulation, you will be required to complete a four-hour general annuity training requirement in order to continue selling annuities. This state-mandated requirement will be different from any training you may have previously completed. Fortunately, the National Association for Fixed Annuities has made it very convenient for you to fulfill this requirement. Just visit NAFA's Continuing Education page, select your state, and look for the indicated four-hour course to satisfy the CE Annuity Suitability Model Training requirement.
Additionally, you will need to complete product-specific training through your annuity carriers before soliciting or selling their annuity products. NAFA and participating member carriers have set this up with an easy, one-stop training room. Make sure to pay attention to any communications from your carriers so you know how to access their training. (Note that Oklahoma has not mandated product-specific training.)
Suitability requirements
A secondary suitability review by the carrier of all annuity transactions was also included in the March 2010 amendments to the NAIC Suitability in Annuity Transactions Model Regulation. This suitability process will require that you gather information on each client's financial status, liquidity needs, and retirement objectives, and that you consider what values and benefits are available to the purchaser and what risks or opportunity costs the purchaser will bear under various possible future scenarios. To the extent that the recommended annuity replaces another financial product, you should consider whether the recommended annuity better satisfies the consumer's needs, and consider any charges, fees, and income tax implications involved in the replacement transaction.
The suitability analysis should be well documented in your files — and should occasionally cause you to advise your clients not to purchase a fixed annuity.
The good news is that if you have a life insurance license, you can continue to sell the full range of fixed annuities, including indexed annuities. A little time and attention to these new training and suitability requirements will help ensure that you remain in business.
In this monthly column, the National Association for Fixed Annuities (NAFA) will provide essential information about fixed annuity product features, regulation, tax issues, and industry news. We invite you, the reader, to send us any questions that you often hear — or that you may have yourself. Submit your questions to ASJeditor@AgentMedia.com with the subject line "Fixed Annuity FAQ" to have your problems answered here.
The National Association for Fixed Annuities (NAFA) is a national trade association exclusively dedicated to promoting the awareness and understanding of fixed annuities — including income, declared rate, market value adjusted, and indexed. You can follow NAFA on Twitter at www.twitter.com/nafausa.
For more annuity coverage, visit ASJ's Annuity Resource Center
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