On May 18, 2009, the Florida Department of Financial Services announced a notice of proposed rulemaking to adopt new Rule 69B-162.011, which will be published officially on May 22nd. This proposed Rule implements certain parts of the amendments to Florida Statutes Section 627.4554 which, beginning January 1, 2009, imposed more stringent suitability and replacement requirements on the sale of annuities to consumers age 65 or older. Section 627.4554 requires, among other things, that for any recommendation of an annuity to a senior, there must be an objectively reasonable basis for believing that the recommendation is suitable based on specific information that the agent (or the insurer if no agent is involved) must make reasonable efforts to obtain from the senior consumer on a form adopted by the Department. Section 627.4554 also requires that senior consumers be provided with specific information comparing the annuities involved in a replacement or exchange transaction on a form adopted by the Department. Other than the use of the Department adopted forms, insurers, as well as agents, must have begun complying with Section 627.4554 beginning on January 1, 2009.
In January 2009, the Department published its initial proposed version of Rule 69B-162.011 along with an Annuity Suitability form and a Disclosure and Comparison form. The Department held a Rule Development Workshop on February 2, 2009, at which time regulators and interested parties discussed concerns about the proposed forms as well as operational implications and alternative recommendations to the proposed rule and forms. Specific implications and alternative recommendations are highlighted in our prior Alerts regarding the proposed Rule and the Workshop.
The Department's notice of proposed rulemaking contains the following changes to the proposed Rule (but no changes to the accompanying Annuity Suitability and Disclosure and Comparison forms):
- Annuity sales that are subject to FINRA's suitability rules are exempted from the requirement of using the Annuity Suitability form.
- Insurers may adapt the Annuity Suitability form or the Disclosure and Comparison form for their own use upon written approval from the Department.
- The Rule specifies the conditions under which the Department would approve insurer adapted forms.
The proposed Rule also provides that the Department's approval of an adapted form does not preclude subsequent disapproval by the Florida Office of Insurance Regulation.
While the proposed Rule provides that the forms are incorporated by reference into Section 627.4554, effective January 1, 2009, we have communicated with the Department and have been informally advised that the forms would be required to be used 60 days after the date the proposed Rule is adopted.
The proposed Rule has been approved by Florida's Chief Financial Officer and the Department has no intent to hold further hearings on the proposed Rule unless a request for a hearing is made in writing on or before June 12, 2009. If requested, the hearing will be held on June 16th at 9:30 a.m. If not, the Department has informally advised us that it expects the Rule will be adopted in mid-June, and take effect in mid-August.