The Florida Department of Financial Services held a Rule Development Workshop on February 2, 2009 to receive comments on the Department's proposed annuity suitability and replacement forms for senior sales. When these proposed forms are adopted by Rule, insurers and agents will be required to use them for all annuity sales to persons age 65 and older pursuant to the June 30, 2008 amendments to Section 627.4554 of the Florida Statutes ("Annuity investments by seniors"). In the interim, insurers and agents have been directed to adhere to the requirements outlined in Section 627.4554 to determine senior suitability or to compare annuity contracts prior to an exchange. Copies of the proposed forms are available on the Department's Division of Agent and Agency Services' website.
Industry comments at the Workshop centered on both the content of the proposed forms as well as operational implications arising from the forms' design, including redundancy with existing required replacement forms. The Department's responses also provided insight into the Department's thinking (or at least the thinking of its representatives at the Workshop) as to the forms' purposes and uses, which are not necessarily consistent with the amended statute.
The most commented upon feature of the proposed forms were the "fill in the blank" questions on the suitability form, which require, among other things, an identification of the "advantages" and "disadvantages" of the proposed purchase. Comments included whether the three-line blanks for narrative responses could be replaced with "yes/no" or "check-the-box" questions, with one commenter noting that narrative responses could not be processed through OCR systems, which some carriers would be using to facilitate their initial flag screening of potentially unsuitable sales. While the Department took note of these concerns, the Department's representative stated that the Department was not inclined to eliminate the narrative process because the purpose of the form is "to facilitate communication between the agent and prospective contract owner."
A commenter questioned whether, instead of using the Department's forms, insurers could use substantially similar forms. One of the Department's representatives responded by stating that the purpose of the proposed suitability form "is not to collect information, but to facilitate communication and engender understanding about the products being offered" to the consumer. Therefore, whether a substantially similar form meets this objective will depend on the "effectiveness of achieving that education" as opposed to merely collecting information and entering it into a database. The representative then appeared to signal that the Department would permit substantially similar forms, by noting that if an insurer uses its own suitability form, then the insurer must submit the form to the Department for approval.
Another commenter asked whether insurers could use product specific suitability forms, such as one for fixed annuities and another for variable annuities. The Department stated that limiting the suitability form to a specific product type would hinder the agent's evaluation of whether another annuity product type would be in the "best interest" of the consumer. The Department representative said that the form should be used as a "tool" to determine what product fits best with the consumer's needs.
Most notable from the Workshop was that, in addition to operational difficulties that will result from the specific content and design of the forms, the Department may have expectations as to the nature of a suitability analysis that extends beyond Florida's statutory requirements and industry's current understanding of what is legally required for a "suitable" sale.
The Department is holding the record open until February 9, 2009 for additional written comments. Following the close of the comment period, the Department will publish a notice of proposed rulemaking. Florida's Administrative Procedures Act will afford interested parties the right to comment on the proposed final rule at a future public hearing; however, we recommend that industry participants take advantage of the current comment period to provide further input before the Department publishes its formal rule proposal.