Committee Substitute for Committee Substitute for Senate Bill 166 (CS/CS/SB 166) expands application of the annuity recommendation standards provided in section 627.4554, Fla. Stat., to all consumers. CS/CS/SB incorporates the 2010 National Association of Insurance Commissioners (“NAIC”) model regulation on annuity protections, broadens the scope of coverage to generally include all annuity transactions, and imposes additional duties on agents and insurers. CS/CS/SB 166 is effective October 1, 2013.

CS/CS/SB 166 will be presented to the Governor and is subject to his veto authority. We recommend you check the ultimate status of this bill by visiting the Florida Legislature’s website (

Key provisions of CS/CS/SB 166 are summarized below1:

  • Requires an insurer or insurance agent recommending the purchase or exchange of an annuity that results in an insurance transaction to have reasonable grounds to believe the recommendation is suitable for the consumer, based on the consumer’s suitability information. The insurer or agent must also have a reasonable basis to believe:
    • The consumer has been reasonably informed of the annuity’s features, such as potential surrender period and surrender charge; potential tax penalties if the consumer sells, exchanges, surrenders, or annuitizes the annuity; mortality and expense fees; investment advisory fees; riders, their features, and potential charges; limits on interest returns; insurance and investment components; and, market risk.
    • The consumer will benefit from certain features of the annuity, such as tax-deferred growth, annuitization, or the death or living benefit.
    • The annuity and any associated sub-accounts, riders, and product enhancements are suitable. If the annuity is being exchanged or replaced, it must be suitable for the particular consumer based on his or her suitability information.
  • Requires insurance agents to obtain specified personal and financial information from the consumer relevant to the suitability of the recommendation on a form (DFS-H1-1980) promulgated by the Department of Financial Services (“DFS”) prior to recommending products.
  • Imposes additional duties on insurers or insurance agents if a transaction involves the exchange or replacement of an annuity. The insurer or agent must now consider whether the consumer:
    • Will incur a surrender charge; be subject to commencement of a new surrender period; lose existing benefits (death, living, or other contractual benefits), or be subject to increased fees (including investment advisory fees or charges for riders or other similar product enhancements);
    • Will benefit from product enhancements and improvements; and
    • Has had another annuity exchange or replacement, in particular within the past 36 months.
  • Requires insurers or agents to provide all consumers information on DFS form (DFS-H1-1981) concerning differences between the annuity being recommended for purchase and the existing annuity to be surrendered or replaced. Under current law, this only applies to transactions involving senior consumers.
  • Retains the requirement in current law that insurers or their agents use reasonable efforts to obtain consumer suitability information.
  • Subjects insurers to liability for violations made by contract workers. Insurers may contract with outside entities to sell products, but if an insurer does so, it remains subject to sanctions and penalties and must supervise the contract performance. This appears to depart from current law, which provides: “Nothing in this section shall subject an insurer to criminal or civil liability for the acts of independent individuals not affiliated with that insurer for selling its products, when such sales are made in a way not authorized by the insurer.”
  • Prohibits agents from dissuading or attempting to dissuade a consumer from truthfully responding to the insurer’s request for suitability information, filing a complaint, or cooperating with the investigation of a complaint.
  • Authorizes the Office of Insurance Regulation (“OIR”) to order an insurer to take reasonably appropriate corrective action for a consumer harmed by the actions of the insurer or an insurer’s agent.
  • Removes language specifying that the OIR may require the rescission of the policy, a full refund of the premiums paid, or a refund of the accumulation value. Rescission is still, however, an option available to the OIR.
  • Authorizes the Florida Department of Financial Services (“DFS”) to order reasonably appropriate corrective action, including monetary restitution of penalties or fees incurred by the consumer. The DFS is required to order an insurance agent to pay restitution to a consumer who is deprived of money due to the agent’s misappropriation, conversion, or unlawful withholding of moneys belonging to the consumer.
  • Authorizes the DFS to order a managing general agency or insurance agency to take corrective action.
  • Requires the OIR or the DFS to eliminate or reduce insurance code penalties if corrective action for the consumer is promptly taken after the discovery of a violation.
  • Retains the requirement in current law that a violation of the consumer protection standards in the bill does not create or imply the existence of a private cause of action.
  • Retains the requirement in current law that an annuity contract issued to a senior consumer may not contain a surrender charge or deferred sales charge for a withdrawal of money from an annuity exceeding 10 percent of the amount withdrawn. The charge must be reduced so that no surrender or deferred sales charge exists after the end of the tenth policy year or 10 years after the premium is paid, whichever is later. Purchases by accredited investors and contracts used to fund specified benefit plans, personal injury litigation settlements, or prepaid funeral contracts are exempt from this requirement.
  • Defines “suitability information” as information related to the consumer that is reasonably appropriate to determine the suitability of a recommendation made to the consumer.
  • Requires that annuity sales made in compliance with the Financial Industry Regulatory Authority, Inc.’s (“FINRA”) requirements pertaining to the suitability and supervision of annuity transactions also comply with the consumer protection requirements in the bill. This requirement only applies if the FINRA broker dealer sells an annuity and the suitability and supervision is similar to those applied to variable annuity sales. The insurer monitors the FINRA member broker-dealer and the insurer provides information to the FINRA member broker-dealer in maintaining its supervision system.
  • Requires insurers and agents to retain records on annuity transaction for five years.
  • Grants rulemaking authority to the DFS and the Financial Services Commission to adopt rules to administer the section.
  • Amends section 626.99, Fla. Stat., to apply to all consumers the requirement that annuity policies provide an unconditional refund for at least 21 days and be equal to the surrender value of the annuity contract.
  • Requires that disclosures on the mandatory cover page of an annuity contract to inform consumers of the bonus feature within the contract; that the purchase of a contract may restrict access to money; that interest rates may change periodically; and that the insurer is required to provide a prospectus.