NAIC Suitability in Annuity Transactions Model Regulation (#275)

What this document is

NAIC Suitability in Annuity Transactions Model Regulation (#275) is a naic model law published by National Association of Insurance Commissioners (NAIC). It is one of the documents that insurance license exam questions are written from, including life & health practice questions. This page summarizes it and points to the official version, which is the text to rely on.

Sections cited in practice questions

Each practice answer shows the exact passage it comes from. These are sections of this document that questions cite, with a short excerpt from the source text.

• NAIC Model #275: Section 7B(4) (Producer Training; course content restrictions)

  “Providers of courses intended to comply with this subsection shall cover all topics listed in the prescribed outline and shall not present any marketing information or provide training on sales techniques or provide specific information about a particular insurer’s products. Additional topics may...”

• NAIC Model #275: Section 6 (Duties of Insurers and Producers)

  “(3) (a) Nothing in this subsection restricts an insurer from contracting for performance of a function (including maintenance of procedures) required under this subsection. An insurer is responsible for taking appropriate corrective action and may be subject to sanctions and penalties pursuant to...”

• NAIC Model NAIC 275: Section 6A (Best Interest Obligations)

  “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.”

• NAIC Model NAIC 275: Section 7B(11) (Producer Training)

  “An insurer shall verify that a producer has completed the annuity training course required under this subsection before allowing the producer to sell an annuity product for that insurer.”

• NAIC Model NAIC 275: Section 6C(2)(h) (Supervision System)

  “The insurer shall establish and maintain reasonable procedures to identify and eliminate any sales contests, sales quotas, bonuses, and non-cash compensation that are based on the sales of specific annuities within a limited period of time.”

• NAIC Suitability in Annuity Transactions Model Regulation § 6A(4)(a), documentation obligation

  “Documentation obligation. A producer shall at the time of recommendation or sale: (a) Make a written record of any recommendation and the basis for the recommendation subject to this regulation;”

• NAIC Suitability in Annuity Transactions Model Regulation (#275) § 6A(2)(b), disclosure of cash compensation upon request

  “Upon request of the consumer or the consumer’s designated representative, the producer shall disclose: (i) A reasonable estimate of the amount of cash compensation to be received by the producer, which may be stated as a range of amounts or percentages; and (ii) Whether the cash compensation is a...”

• NAIC Suitability in Annuity Transactions Model Regulation (#275) § 6A(2)(a), disclosure obligation, scope of the relationship and the producer's role

  “Prior to the recommendation or sale of an annuity, the producer shall prominently disclose to the consumer on a form substantially similar to Appendix A: (i) A description of the scope and terms of the relationship with the consumer and the role of the producer in the transaction;”

• NAIC Suitability in Annuity Transactions Model Regulation (#275) § 5M, definition of recommendation

  ““Recommendation” means advice provided by a producer to an individual consumer that was intended to result or does result in a purchase, an exchange or a replacement of an annuity in accordance with that advice. (2) Recommendation does not include general communication to the public, generalized...”

• NAIC Suitability in Annuity Transactions Model Regulation (#275) § 6B(1), transactions not based on a recommendation

  “Except as provided under Paragraph (2), a producer shall have no obligation to a consumer under Subsection A(1) related to any annuity transaction if: (a) No recommendation is made; (b) A recommendation was made and was later found to have been prepared based on materially inaccurate information...”

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