On October 9, 2009, the Florida Division of Administrative Hearings ("DOAH") dismissed the American Council of Life Insurance's ("ACLI") petition to invalidate the Florida Department of Financial Services' ("DFS") Proposed Rule 69B-162.011 (the "Proposed Rule"). The Proposed Rule implements Florida Statutes Section 627.4554, by adopting suitability and replacement comparison forms to be used with annuity sales to consumers age 65 or older.

The DOAH rejected ACLI's rule challenge petition on procedural grounds, rather than on the merits. The DOAH concluded that ACLI's petition was filed untimely. It also concluded that any amendment to the petition would not allow the ACLI to state a cause of action in this rule challenge proceeding.

Under the Proposed Rule, before executing a purchase or exchange of an annuity to a senior consumer, an insurance agent or an insurer must use the DFS's "Annuity Suitability Questionnaire" form to obtain information in order to determine the suitability of the recommendation. Also, the Proposed Rule requires that, before executing an exchange of annuity to a senior consumer, the insurance agent or insurer must provide contract comparison information to the senior consumer using the DFS's "Disclosure and Comparison of Annuity Contracts" form.

The Proposed Rule allows an insurer to adapt these forms for its use subject to certain conditions and the written approval of the DFS. While the Proposed Rule grants the DFS authority to approve an adapted form, it also establishes that the Florida Office of Insurance Regulation ("OIR") may subsequently disapprove the adapted form. As a result, insurers wanting to use adapted forms will effectively need to file them with and seek the approval of both the DFS and the OIR. The Proposed Rule also incorporates by reference the exemption in Section 627.4554(8), which provides that any person who is registered with a member of the Financial Industry Regulatory Authority ("FINRA"), who is required to make a suitability determination, and who makes and documents such determination is deemed to satisfy the suitability requirements under Section 627.4554. Accordingly, insurance agents meeting the exemption will not have to use DFS's "Annuity Suitability Questionnaire" form in connection with sales of annuities subject to FINRA regulation. A copy of the text of the Proposed Rule is available here, and copies of the forms are available here.

We understand that the DFS intends to file the Proposed Rule for final adoption this month, with the Proposed Rule to take effect sixty days thereafter. Thus, insurers and insurance agents should be prepared to use the new forms, or approved adapted forms, commencing sometime in December 2009.