Regular Session 2017-2018 House Bill 0152 P.N. 3556

SENATE AMENDED

PRIOR PRINTER'S NOS. 116, 145, 399

PRINTER'S NO. 3556

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

152

Session of

2017

INTRODUCED BY M. QUINN, DeLUCA, PICKETT, BARRAR, BIZZARRO,

CALTAGIRONE, DAVIDSON, DAVIS, DOWLING, DRISCOLL, FLYNN,

GAINEY, HELM, LONGIETTI, MURT, O'NEILL, PASHINSKI, READSHAW,

WARD, WATSON, MATZIE, D. COSTA, KORTZ, ENGLISH, BARBIN,

GILLEN, DONATUCCI AND SANTORA, JANUARY 23, 2017

SENATOR WHITE, BANKING AND INSURANCE, IN SENATE, AS AMENDED, MAY

23, 2018

AN ACT

Amending Title 40 (Insurance) of the Pennsylvania Consolidated

Statutes, in general provisions, providing for life insurance

database.

AMENDING THE ACT OF MAY 17, 1921 (P.L.682, NO.284), ENTITLED "AN

ACT RELATING TO INSURANCE; AMENDING, REVISING, AND

CONSOLIDATING THE LAW PROVIDING FOR THE INCORPORATION OF

INSURANCE COMPANIES, AND THE REGULATION, SUPERVISION, AND

PROTECTION OF HOME AND FOREIGN INSURANCE COMPANIES, LLOYDS

ASSOCIATIONS, RECIPROCAL AND INTER-INSURANCE EXCHANGES, AND

FIRE INSURANCE RATING BUREAUS, AND THE REGULATION AND

SUPERVISION OF INSURANCE CARRIED BY SUCH COMPANIES,

ASSOCIATIONS, AND EXCHANGES, INCLUDING INSURANCE CARRIED BY

THE STATE WORKMEN'S INSURANCE FUND; PROVIDING PENALTIES; AND

REPEALING EXISTING LAWS," IN LIFE INSURANCE, FURTHER

PROVIDING FOR SURPLUS OR SAFETY FUND AND PROVIDING FOR

CONTACT INFORMATION AND FOR LIFE POLICY LOCATOR SERVICE; AND,

IN SUITABILITY OF ANNUITY TRANSACTIONS, FURTHER PROVIDING FOR

DEFINITIONS, FOR APPLICABILITY AND SCOPE OF ARTICLE, AND FOR

DUTIES OF INSURERS AND FOR INSURANCE PRODUCERS, PROVIDING FOR

INSURANCE PRODUCER TRAINING, FURTHER PROVIDING FOR MITIGATION

OF RESPONSIBILITY AND FOR RECORDKEEPING AND PROVIDING FOR

REGULATIONS.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. Title 40 of the Pennsylvania Consolidated

<--

Statutes is amended by adding a section to read:

§ 102. Life insurance database.

(a) Contact information.--The following shall apply

regarding contact information:

(1) The department or its designee shall maintain an

electronic database of contact information for each life

insurer that has life insurance policies, annuity contracts

or retained asset accounts in force in this Commonwealth.

(2) All life insurers, including those insurers under

Article XXIV of the act of May 17, 1921 (P.L.682, No.284),

known as The Insurance Company Law of 1921, having a life

insurance policy , annuity contract or retained asset account

in force in this Commonwealth shall provide and maintain with

the department or its designee a valid e-mail address to

which the department or its designee may send the requests

received under this act.

(b) Who may request search.--

(1) Subject to paragraph (2), the following may file

with the department or its designee a request to conduct a

search for life insurance policies , annuity contracts or

retained asset accounts covering a decedent:

(i) A member of the decedent's family who has

requested and obtained a copy of the decedent's death

certificate.

(ii) A personal representative of the decedent's

estate.

(2) A request to conduct a search may occur only if:

(i) the decedent was a resident or former resident

of this Commonwealth; and

(ii) the request is accompanied by a copy of the

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decedent's death certificate.

(3) The right to file a request to conduct a search may

not be assigned.

(1) The department or its designee shall transmit a

request to conduct a search to all life insurers having life

insurance policies , annuity contracts or retained asset

accounts in force in this Commonwealth along with information

necessary for responding directly to the person filing the

request.

(2) The information submitted to insurers must be on a

standardized form or the search requests must be available to

the life insurers on the secure website of the department or

its designee.

(d) Good faith efforts.--

(1) In response to a search request under this section,

each insurer shall in good faith examine its books and

records to determine whether the decedent is covered by a

life insurance policy , annuity contract or retained asset

account . Upon a finding that coverage does exist, the insurer

shall directly notify the requesting personal representative,

if any, and the beneficiary or beneficiaries to whom the

benefits are due .

(2) Within 90 days of receiving the search request from

the department or its designee, the insurer shall complete

good faith efforts to confirm the death of the insured,

annuity contract holder or retained assets account holder

against other available records and information. The efforts

shall be documented by the insurer and determine whether

benefits are due in accordance with the applicable policy or

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contract.

(3) Within 120 days of receiving the search request from

the department or its designee, if all the beneficiaries to

whom the benefits are due have not been located, the issuer

shall directly notify the requesting personal representative,

if any, to advise the personal representative of the name of

each beneficiary who has not been located.

(e) Beneficiary claim.--If, as a result of the search under

this section, benefits are due, the insurer shall:

(1) Use good faith efforts to locate each beneficiary.

The efforts shall be documented by the insurer.

(2) Provide the appropriate claims forms or instructions

to each beneficiary to make a claim, including instructions

on the need to provide an official death certificate, if

applicable under the policy or contract.

(f) General procedure.--An insurer under this section shall

implement procedures to account for all of the following:

(1) Common nicknames, initials used in lieu of a first

or middle name, use of a middle name, compound first and

middle names and interchanged first and middle names.

(2) Compound last names, maiden or married names and

hyphens, blank spaces or apostrophes in last names.

(3) Transposition of the month and date portions of the

date of birth.

(4) An incomplete Social Security number.

(g) Fees.--

(1) The department may charge a fee of $10 for each

search request processed through the database.

(2) The department may develop and implement an

electronic payment system that may be used regarding search

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requests.

(3) Beginning one year after the effective date of this

section, the department shall have authority to increase the

fee charged. The fee increase may not exceed:

(i) an annual cost-of-living adjustment as

calculated by applying the percentage increase in the

Consumer Price Index for All Urban Consumers (CPI-U) for

the Pennsylvania, New Jersey, Delaware and Maryland area

for the most recent 12-month period for which figures

have been officially reported by the United States

Department of Labor, Bureau of Labor Statistics; and

(ii) twenty percent annually.

(h) Rules and regulations.--The department may promulgate

rules and regulations necessary to implement the provisions of

this section.

(i) Definitions.--As used in this section, the term

"personal representative" shall have the same meaning as given

to the term under 20 Pa.C.S. § 102 (relating to definitions).

Section 2. This act shall take effect July 1, 2017, or

immediately, whichever is later.

SECTION 1. SECTION 429 OF THE ACT OF MAY 17, 1921 (P.L.682,

NO.284), KNOWN AS THE INSURANCE COMPANY LAW OF 1921, IS

REPEALED:

[SECTION 429. SURPLUS OR SAFETY FUND.--ANY MUTUAL LIFE

INSURANCE COMPANY, INCORPORATED UNDER THE LAWS OF THIS

COMMONWEALTH AND TRANSACTING BUSINESS THEREIN, MAY ESTABLISH AND

MAINTAIN, OR, IF ALREADY ESTABLISHED, MAY CONTINUE TO MAINTAIN,

A SURPLUS OR SAFETY FUND TO AN AMOUNT NOT IN EXCESS OF TEN PER

CENTUM OF ITS RESERVE, OR ONE HUNDRED THOUSAND DOLLARS,

WHICHEVER IS GREATER, AND THE EXCESS OF THE MARKET VALUE OF ITS

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<--

SECURITIES OVER THEIR BOOK VALUE.

IN CASES WHERE THE SURPLUS OR SAFETY FUND AT PRESENT

EXISTING, EXCLUSIVE OF ALL ACCUMULATIONS HELD ON ACCOUNT OF THE

OUTSTANDING DEFERRED DIVIDEND POLICIES, EXCEEDS THE LIMIT ABOVE

DESIGNATED, THE COMPANY SHALL BE ENTITLED TO RETAIN SAID SURPLUS

OR SAFETY FUND, BUT SHALL NOT BE ENTITLED TO ADD THERETO SO LONG

AS IT EXCEEDS SAID LIMIT.

FOR CAUSE SHOWN, THE INSURANCE COMMISSIONER MAY, AT ANY TIME,

PERMIT ANY CORPORATION TO ACCUMULATE AND MAINTAIN A SURPLUS OR

SAFETY FUND IN EXCESS OF THE LIMIT ABOVE MENTIONED FOR A

PRESCRIBED PERIOD, NOT EXCEEDING ONE YEAR IN ANY ONE PERMISSION,

BY FILING IN HIS OFFICE A DECISION STATING HIS REASONS THEREFOR

AND CAUSING THE SAME TO BE PUBLISHED IN HIS NEXT ANNUAL REPORT.]

SECTION 2. ARTICLE IV OF THE ACT IS AMENDED BY ADDING A

SUBARTICLE TO READ:

(D) PROVISIONS RELATING TO

LOCATING LIFE INSURANCE POLICIES.

SECTION 441. CONTACT INFORMATION.--THE FOLLOWING SHALL APPLY

REGARDING CONTACT INFORMATION:

(A) THE INSURANCE DEPARTMENT SHALL MAINTAIN AN ELECTRONIC

DATABASE OF CONTACT INFORMATION FOR EACH LIFE INSURER THAT HAS

LIFE INSURANCE POLICIES OR ANNUITY CONTRACTS IN FORCE IN THIS

COMMONWEALTH.

(B) ALL LIFE INSURERS, INCLUDING THOSE INSURERS UNDER

ARTICLE XXIV, HAVING A LIFE INSURANCE POLICY OR ANNUITY CONTRACT

IN FORCE IN THIS COMMONWEALTH SHALL PROVIDE AND MAINTAIN WITH

THE INSURANCE DEPARTMENT A VALID E-MAIL ADDRESS.

SECTION 442. LIFE POLICY LOCATOR SERVICE.--THE INSURANCE

DEPARTMENT AND ALL LIFE INSURERS, THROUGH THE CONTACT

INFORMATION IDENTIFIED IN SECTION 441(A), SHALL PARTICIPATE IN

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THE LIFE POLICY LOCATOR SERVICE ADOPTED BY THE NATIONAL

ASSOCIATION OF INSURANCE COMMISSIONERS IN PROVIDING FOR AND

RESPONDING TO SEARCH REQUESTS FOR LIFE INSURANCE POLICIES OR

ANNUITIES IN FORCE IN THIS COMMONWEALTH COVERING A DECEDENT.

SECTION 3. SECTIONS 401-B, 402-B AND 403-B OF THE ACT ARE

AMENDED TO READ:

SECTION 401-B. DEFINITIONS.

THE FOLLOWING WORDS AND PHRASES WHEN USED IN THIS ARTICLE

SHALL HAVE THE MEANINGS GIVEN TO THEM IN THIS SECTION UNLESS THE

CONTEXT CLEARLY INDICATES OTHERWISE:

"ANNUITY." [A FIXED ANNUITY OR VARIABLE ANNUITY THAT IS] AN

ANNUITY THAT IS AN INSURANCE PRODUCT AND IS INDIVIDUALLY

SOLICITED, WHETHER THE INSURANCE PRODUCT IS CLASSIFIED AS AN

INDIVIDUAL OR GROUP ANNUITY.

"COMMISSIONER." THE INSURANCE COMMISSIONER OF THE

COMMONWEALTH.

"CONTINUING EDUCATION CREDIT." ONE CONTINUING EDUCATION

CREDIT UNDER SECTION 608-A OF THE ACT OF MAY 17, 1921 (P.L.789,

NO.285), KNOWN AS THE INSURANCE DEPARTMENT ACT OF 1921.

"CONTINUING EDUCATION PROVIDER." AN INDIVIDUAL OR ENTITY

APPROVED TO OFFER CONTINUING EDUCATION COURSES UNDER SECTION

608-A OF THE INSURANCE DEPARTMENT ACT OF 1921.

"DEPARTMENT." THE INSURANCE DEPARTMENT OF THE COMMONWEALTH.

"FINRA." THE FINANCIAL INDUSTRY REGULATORY AUTHORITY OR A

SUCCEEDING AGENCY.

"GENERAL AGENT." AN INSURANCE PRODUCER THAT PROVIDES

SUPERVISION ON BEHALF OF AN INSURER TO AN INSURER'S SALES FORCE

IN A PARTICULAR GEOGRAPHIC REGION OR TERRITORY.

["INDEPENDENT AGENCY." A PRODUCER ENTITY THAT DOES NOT

EXCLUSIVELY REPRESENT ONE INSURANCE COMPANY.]

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"INSURANCE PRODUCER." A PERSON WHO SELLS, SOLICITS OR

NEGOTIATES CONTRACTS OF INSURANCE AS DEFINED IN SECTION 601-A OF

[THE ACT OF MAY 17, 1921 (P.L.789, NO.285), KNOWN AS] THE

INSURANCE DEPARTMENT ACT OF 1921.

"INSURER." A LIFE INSURANCE COMPANY LICENSED OR REQUIRED TO

BE LICENSED UNDER SECTION 202 OR A FRATERNAL BENEFIT SOCIETY AS

DEFINED IN SECTION 2403.

"RECOMMENDATION." ADVICE PROVIDED BY AN INSURANCE PRODUCER,

OR AN INSURER WHERE NO PRODUCER IS INVOLVED, TO AN INDIVIDUAL

CONSUMER THAT RESULTS IN A PURCHASE OR EXCHANGE OF AN ANNUITY IN

ACCORDANCE WITH THAT ADVICE.

"REPLACE" OR "REPLACEMENT." THE PURCHASE OF A NEW POLICY OR

CONTRACT WHERE IT IS KNOWN OR SHOULD BE KNOWN TO THE PROPOSING

PRODUCER, OR TO THE PROPOSING INSURER IF THERE IS NO INSURANCE

PRODUCER, THAT BY REASON OF THE TRANSACTION, AN EXISTING POLICY

OR CONTRACT HAS BEEN OR WILL BE:

(1) LAPSED, FORFEITED, SURRENDERED OR PARTIALLY

SURRENDERED OR ASSIGNED TO THE REPLACING INSURER OR OTHERWISE

TERMINATED;

(2) CONVERTED TO REDUCED PAID-UP INSURANCE, CONTINUED AS

EXTENDED TERM INSURANCE, OR OTHERWISE REDUCED IN VALUE BY THE

USE OF NONFORFEITURE BENEFITS OR OTHER POLICY VALUES;

(3) AMENDED SO AS TO EFFECT A REDUCTION IN BENEFITS OR

IN THE TERM FOR WHICH COVERAGE WOULD OTHERWISE REMAIN IN

FORCE OR FOR WHICH BENEFITS WOULD BE PAID;

(4) REISSUED WITH A REDUCTION IN CASH VALUE; OR

(5) USED IN A FINANCED PURCHASE.

"SUITABILITY INFORMATION." INFORMATION RELATING TO AN

ANNUITY THAT IS APPROPRIATE TO DETERMINE THE SUITABILITY OF A

RECOMMENDATION, INCLUDING:

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(1) AGE.

(2) ANNUAL INCOME.

(3) FINANCIAL SITUATION AND NEEDS, INCLUDING THE

FINANCIAL RESOURCES USED FOR THE FUNDING OF THE ANNUITY.

(4) FINANCIAL EXPERIENCE.

(5) FINANCIAL OBJECTIVES.

(6) INTENDED USE OF THE ANNUITY.

(7) FINANCIAL TIME HORIZON.

(8) EXISTING ASSETS, INCLUDING INVESTMENT AND LIFE

INSURANCE HOLDINGS.

(9) LIQUIDITY NEEDS.

(10) LIQUID NET WORTH.

(11) RISK TOLERANCE.

(12) TAX STATUS.

SECTION 402-B. APPLICABILITY AND SCOPE OF ARTICLE.

(A) GENERAL RULE.--THIS ARTICLE SHALL APPLY TO ANY

RECOMMENDATION TO PURCHASE OR [EXCHANGE] REPLACE AN ANNUITY MADE

TO A CONSUMER BY AN INSURANCE PRODUCER, OR AN INSURER WHERE NO

PRODUCER IS INVOLVED, THAT RESULTS IN THE PURCHASE OR [EXCHANGE]

REPLACEMENT RECOMMENDED.

(B) EXCLUSIONS.--UNLESS OTHERWISE SPECIFICALLY INCLUDED,

THIS ARTICLE SHALL NOT APPLY TO RECOMMENDATIONS INVOLVING THE

FOLLOWING:

(1) DIRECT RESPONSE SOLICITATIONS WHERE THERE IS NO

RECOMMENDATION BASED ON INFORMATION COLLECTED FROM THE

CONSUMER PURSUANT TO THIS ARTICLE.

(2) [ANNUITY CONTRACTS] CONTRACTS USED TO FUND:

(I) AN EMPLOYEE PENSION OR WELFARE BENEFIT PLAN THAT

IS COVERED BY THE EMPLOYEE RETIREMENT INCOME SECURITY ACT

OF 1974 (PUBLIC LAW 93-406, 88 STAT. 829).

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(II) A PLAN DESCRIBED BY SECTIONS 401(A) OR (K),

403(B), 408(K) OR (P) OF THE INTERNAL REVENUE CODE OF

1986 (PUBLIC LAW 99-514, 26 U.S.C. §§ 401(A) OR (K),

403(B), 408(K) OR (P)), WHEN THE PLAN, FOR PURPOSES OF

THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, IS

ESTABLISHED OR MAINTAINED BY AN EMPLOYER.

(III) A GOVERNMENTAL OR CHURCH PLAN DEFINED IN

SECTION 414 OF THE INTERNAL REVENUE CODE OF 1986 OR A

DEFERRED COMPENSATION PLAN OF A STATE OR LOCAL GOVERNMENT

OR TAX EXEMPT ORGANIZATION UNDER SECTION 457 OF THE

INTERNAL REVENUE CODE OF 1986.

(IV) A NONQUALIFIED DEFERRED COMPENSATION

ARRANGEMENT ESTABLISHED OR MAINTAINED BY AN EMPLOYER OR

PLAN SPONSOR.

(V) SETTLEMENTS OF OR ASSUMPTIONS OF LIABILITIES

ASSOCIATED WITH PERSONAL INJURY LITIGATION OR ANY DISPUTE

OR CLAIM RESOLUTION PROCESS.

(VI) FORMAL PREPAID FUNERAL CONTRACTS.

SECTION 403-B. DUTIES OF INSURERS AND INSURANCE PRODUCERS.

(A) GENERAL DUTIES.--IN MAKING A RECOMMENDATION TO A

CONSUMER FOR THE PURCHASE OR REPLACEMENT OF AN ANNUITY [OR THE

EXCHANGE OF AN ANNUITY] THAT RESULTS IN ANOTHER INSURANCE

TRANSACTION OR SERIES OF INSURANCE TRANSACTIONS, THE INSURANCE

PRODUCER, OR THE INSURER WHERE NO INSURANCE PRODUCER IS

INVOLVED, SHALL HAVE REASONABLE GROUNDS FOR BELIEVING THAT

[THE]:

(1) THE RECOMMENDATION IS SUITABLE FOR THE CONSUMER ON

THE BASIS OF THE FACTS DISCLOSED BY THE CONSUMER AS TO THE

CONSUMER'S INVESTMENTS AND OTHER INSURANCE PRODUCTS AND AS TO

[THE CONSUMER'S FINANCIAL SITUATION AND NEEDS.] THE

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CONSUMER'S SUITABILITY INFORMATION.

(2) THE CONSUMER HAS BEEN REASONABLY INFORMED OF VARIOUS

FEATURES OF THE ANNUITY, INCLUDING THE POTENTIAL SURRENDER

PERIOD AND SURRENDER CHARGE, POTENTIAL TAX PENALTY IF THE

CONSUMER SELLS, REPLACES, SURRENDERS OR ANNUITIZES THE

ANNUITY, MORTALITY AND EXPENSE FEES, INVESTMENT ADVISORY

FEES, POTENTIAL CHARGES FOR AND FEATURES OF RIDERS,

LIMITATIONS ON INTEREST RETURNS, INSURANCE AND INVESTMENT

COMPONENTS AND MARKET RISK.

(3) THE CONSUMER WOULD BENEFIT FROM CERTAIN FEATURES OF

THE ANNUITY, INCLUDING TAX-DEFERRED GROWTH, ANNUITIZATION OR

DEATH OR LIVING BENEFIT.

(4) THE PARTICULAR ANNUITY AS A WHOLE, THE UNDERLYING

SUBACCOUNTS TO WHICH FUNDS ARE ALLOCATED AT THE TIME OF

PURCHASE OR REPLACEMENT OF THE ANNUITY, AND RIDERS AND

SIMILAR PRODUCT ENHANCEMENTS, IF ANY, ARE SUITABLE AND, IN

THE CASE OF A REPLACEMENT, THE TRANSACTION AS A WHOLE IS

SUITABLE FOR THE CONSUMER BASED ON THE CONSUMER'S SUITABILITY

INFORMATION.

(5) IN THE CASE OF A REPLACEMENT OF AN ANNUITY, THE

REPLACEMENT IS SUITABLE AND SHALL TAKE INTO CONSIDERATION

WHETHER:

(I) THE CONSUMER WILL INCUR A SURRENDER CHARGE, BE

SUBJECT TO THE COMMENCEMENT OF A NEW SURRENDER PERIOD,

LOSE EXISTING BENEFITS, INCLUDING DEATH, LIVING OR OTHER

CONTRACTUAL BENEFITS, OR BE SUBJECT TO INCREASED FEES,

INVESTMENT ADVISORY FEES OR CHARGES FOR RIDERS AND

SIMILAR PRODUCT ENHANCEMENTS.

(II) THE CONSUMER WOULD BENEFIT FROM PRODUCT

ENHANCEMENTS AND IMPROVEMENTS.

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(III) THE CONSUMER HAS HAD ANOTHER ANNUITY

REPLACEMENT, INCLUDING A REPLACEMENT WITHIN THE PRECEDING

36 MONTHS.

(B) CONSUMER INFORMATION.--PRIOR TO THE EXECUTION OF A

PURCHASE OR [EXCHANGE] REPLACEMENT OF AN ANNUITY RESULTING FROM

A RECOMMENDATION, AN INSURANCE PRODUCER, OR AN INSURER WHERE NO

INSURANCE PRODUCER IS INVOLVED, SHALL MAKE REASONABLE EFFORTS TO

OBTAIN [INFORMATION CONCERNING ALL OF THE FOLLOWING:

(1) THE CONSUMER'S FINANCIAL STATUS.

(2) THE CONSUMER'S TAX STATUS.

(3) THE CONSUMER'S INVESTMENT OBJECTIVES.

(4) OTHER INFORMATION USED OR CONSIDERED TO BE

REASONABLE BY THE INSURANCE PRODUCER, OR THE INSURER WHERE NO

INSURANCE PRODUCER IS INVOLVED, IN MAKING RECOMMENDATIONS TO

THE CONSUMER.] THE CONSUMER'S SUITABILITY INFORMATION.

(B.1) REASONABLE BASIS.--EXCEPT AS PERMITTED UNDER

SUBSECTION (C), AN INSURER MAY NOT ISSUE AN ANNUITY RECOMMENDED

TO A CONSUMER UNLESS THERE IS A REASONABLE BASIS TO BELIEVE THE

ANNUITY IS SUITABLE BASED ON THE CONSUMER'S SUITABILITY

INFORMATION.

(1) [NEITHER] EXCEPT AS PROVIDED UNDER PARAGRAPH (2),

NEITHER AN INSURANCE PRODUCER NOR AN INSURER WHERE NO

INSURANCE PRODUCER IS INVOLVED SHALL HAVE ANY OBLIGATION TO A

CONSUMER UNDER SUBSECTION (A) OR (B.1) RELATED TO ANY

[RECOMMENDATION THAT IS REASONABLE UNDER ALL THE

CIRCUMSTANCES ACTUALLY KNOWN TO THE INSURER OR INSURANCE

PRODUCER AT THE TIME OF THE RECOMMENDATION WHEN A CONSUMER:

(I) REFUSES TO PROVIDE RELEVANT INFORMATION

REQUESTED BY THE INSURER OR INSURANCE PRODUCER.

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(II) DECIDES TO ENTER INTO AN INSURANCE TRANSACTION

THAT IS NOT BASED ON A RECOMMENDATION OF THE INSURER OR

INSURANCE PRODUCER.

(III) FAILS TO PROVIDE COMPLETE OR ACCURATE

INFORMATION.] ANNUITY TRANSACTION IF:

(I) NO RECOMMENDATION IS MADE.

(II) A RECOMMENDATION WAS MADE AND WAS LATER FOUND

TO HAVE BEEN PREPARED BASED ON MATERIALLY INACCURATE

INFORMATION PROVIDED BY THE CONSUMER.

(III) A CONSUMER REFUSES TO PROVIDE RELEVANT

SUITABILITY INFORMATION AND THE ANNUITY TRANSACTION IS

NOT RECOMMENDED.

(IV) A CONSUMER DECIDES TO ENTER INTO AN ANNUITY

TRANSACTION THAT IS NOT BASED ON A RECOMMENDATION OF THE

INSURER OR THE INSURANCE PRODUCER.

(2) AN INSURER'S ISSUANCE OF AN ANNUITY SUBJECT TO

PARAGRAPH (1) SHALL BE REASONABLE UNDER ALL THE CIRCUMSTANCES

ACTUALLY KNOWN TO THE INSURER AT THE TIME THE ANNUITY IS

ISSUED.

(C.1) DOCUMENTATION.--AN INSURANCE PRODUCER, OR THE

RESPONSIBLE INSURER REPRESENTATIVE IF NO INSURANCE PRODUCER IS

INVOLVED, SHALL AT THE TIME OF SALE OF AN ANNUITY:

(1) MAKE A RECORD OF EACH RECOMMENDATION SUBJECT TO

SUBSECTION (A).

(2) OBTAIN A CUSTOMER-SIGNED STATEMENT DOCUMENTING A

CUSTOMER'S REFUSAL TO PROVIDE SUITABILITY INFORMATION, IF

ANY.

(3) OBTAIN A CUSTOMER-SIGNED STATEMENT ACKNOWLEDGING

THAT AN ANNUITY TRANSACTION IS NOT RECOMMENDED IF THE

CUSTOMER DECIDES TO ENTER INTO AN ANNUITY TRANSACTION THAT IS

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NOT BASED ON THE INSURANCE PRODUCER'S OR INSURER'S

RECOMMENDATION.

(D) SUPERVISION OF RECOMMENDATIONS.--

(1) AN INSURER SHALL [ASSURE THAT A SYSTEM TO SUPERVISE

RECOMMENDATIONS] ESTABLISH A SUPERVISION SYSTEM THAT IS

REASONABLY DESIGNED TO ACHIEVE THE INSURER'S AND ITS

INSURANCE PRODUCER'S COMPLIANCE WITH THIS ARTICLE [IS

ESTABLISHED AND MAINTAINED BY COMPLYING WITH PARAGRAPHS (3)

AND (4) OR SHALL ESTABLISH AND MAINTAIN SUCH A SYSTEM THAT

INCLUDES AT LEAST THE FOLLOWING:

(I) MAINTAINING WRITTEN PROCEDURES.

(II) CONDUCTING PERIODIC REVIEWS OF ITS RECORDS THAT

ARE REASONABLY DESIGNED TO ASSIST IN DETECTING AND

PREVENTING VIOLATIONS OF THIS ARTICLE.

(2) A GENERAL AGENT OR INDEPENDENT AGENCY SHALL ADOPT A

SYSTEM ESTABLISHED BY AN INSURER TO SUPERVISE RECOMMENDATIONS

OF ITS INSURANCE PRODUCERS THAT IS REASONABLY DESIGNED TO

ACHIEVE COMPLIANCE WITH THIS ARTICLE OR SHALL ESTABLISH AND

MAINTAIN A SYSTEM THAT IS REASONABLY DESIGNED TO ACHIEVE

COMPLIANCE WITH THIS ARTICLE. THE SYSTEM MUST INCLUDE AT

LEAST THE FOLLOWING:

(I) MAINTAINING WRITTEN PROCEDURES.

(II) CONDUCTING PERIODIC REVIEWS OF RECORDS THAT ARE

REASONABLY DESIGNED TO ASSIST IN DETECTING AND PREVENTING

VIOLATIONS OF THIS ARTICLE.

(3) AN INSURER MAY CONTRACT WITH A THIRD PARTY,

INCLUDING A GENERAL AGENT OR INDEPENDENT AGENCY, TO ESTABLISH

AND MAINTAIN A SYSTEM OF SUPERVISION AS REQUIRED BY PARAGRAPH

(1) WITH RESPECT TO INSURANCE PRODUCERS UNDER CONTRACT WITH

OR EMPLOYED BY THE THIRD PARTY.

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(4) AN INSURER SHALL MAKE REASONABLE INQUIRY TO ASSURE

THAT THE THIRD PARTY CONTRACTING UNDER PARAGRAPH (3) IS

PERFORMING THE FUNCTIONS REQUIRED UNDER PARAGRAPH (1) AND

SHALL TAKE SUCH ACTION AS IS REASONABLE UNDER THE

CIRCUMSTANCES TO ENFORCE THE CONTRACTUAL OBLIGATION TO

PERFORM THE FUNCTIONS. AN INSURER MAY COMPLY WITH ITS

OBLIGATION TO MAKE REASONABLE INQUIRY BY DOING BOTH OF THE

FOLLOWING:

(I) THE INSURER ANNUALLY OBTAINS, ELECTRONICALLY OR

OTHERWISE, A CERTIFICATION FROM A THIRD PARTY SENIOR

MANAGER WHO HAS RESPONSIBILITY FOR THE DELEGATED

FUNCTIONS THAT THE MANAGER HAS A REASONABLE BASIS TO

REPRESENT, AND DOES REPRESENT, THAT THE THIRD PARTY IS

PERFORMING THE REQUIRED FUNCTIONS.

(II) THE INSURER, BASED ON REASONABLE SELECTION

CRITERIA, PERIODICALLY SELECTS THIRD PARTIES CONTRACTING

UNDER PARAGRAPH (3) FOR A REVIEW TO DETERMINE WHETHER THE

THIRD PARTIES ARE PERFORMING THE REQUIRED FUNCTIONS. THE

INSURER SHALL PERFORM PROCEDURES TO CONDUCT THE REVIEW

THAT ARE REASONABLE UNDER THE CIRCUMSTANCES.

(5) AN INSURER THAT CONTRACTS WITH A THIRD PARTY UNDER

PARAGRAPH (3) AND THAT COMPLIES WITH THE REQUIREMENTS TO

SUPERVISE UNDER PARAGRAPH (4) SHALL HAVE FULFILLED ITS

RESPONSIBILITIES UNDER PARAGRAPH (1).

(6) AN INSURER, GENERAL AGENT OR INDEPENDENT AGENCY IS

NOT REQUIRED TO DO EITHER OF THE FOLLOWING:

(I) REVIEW OR PROVIDE FOR REVIEW OF ALL INSURANCE

PRODUCER-SOLICITED TRANSACTIONS.

(II) INCLUDE IN ITS SYSTEM OF SUPERVISION AN

INSURANCE PRODUCER'S RECOMMENDATIONS TO CONSUMERS OF

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PRODUCTS OTHER THAN THE ANNUITIES OFFERED BY THE INSURER,

GENERAL AGENT OR INDEPENDENT AGENCY.

(7) A GENERAL AGENT OR INDEPENDENT AGENCY CONTRACTING

WITH AN INSURER PURSUANT TO PARAGRAPH (3) SHALL PROMPTLY,

WHEN REQUESTED BY THE INSURER PURSUANT TO PARAGRAPH (4), GIVE

A CERTIFICATION AS DESCRIBED IN PARAGRAPH (4) OR GIVE A CLEAR

STATEMENT THAT IT IS UNABLE TO MEET THE CERTIFICATION

CRITERIA.

(8) NO PERSON MAY PROVIDE A CERTIFICATION UNDER

PARAGRAPH (4)(I) UNLESS BOTH THE FOLLOWING CONDITIONS ARE

MET:

(I) THE PERSON IS A SENIOR MANAGER WITH

RESPONSIBILITY FOR THE DELEGATED FUNCTIONS.

(II) THE PERSON HAS A REASONABLE BASIS FOR MAKING

THE CERTIFICATION.], INCLUDING, BUT NOT LIMITED TO, THE

FOLLOWING:

(I) THE INSURER SHALL MAINTAIN REASONABLE PROCEDURES

TO INFORM ITS INSURANCE PRODUCERS OF THE REQUIREMENTS OF

THIS ARTICLE AND SHALL INCORPORATE THE REQUIREMENTS OF

THIS ARTICLE INTO RELEVANT INSURANCE PRODUCER TRAINING

MANUALS.

(II) THE INSURER SHALL ESTABLISH STANDARDS FOR

INSURANCE PRODUCER PRODUCT TRAINING AND MAINTAIN

REASONABLE PROCEDURES TO REQUIRE ITS INSURANCE PRODUCERS

TO COMPLY WITH THE REQUIREMENTS OF SECTION 403.1-B.

(III) THE INSURER SHALL PROVIDE PRODUCT-SPECIFIC

TRAINING AND TRAINING MATERIALS THAT EXPLAIN ALL MATERIAL

FEATURES OF ITS ANNUITY PRODUCTS TO ITS INSURANCE

PRODUCERS.

(IV) THE INSURER SHALL MAINTAIN PROCEDURES FOR

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REVIEW OF EACH RECOMMENDATION BEFORE ISSUANCE OF AN

ANNUITY THAT ARE DESIGNED TO ENSURE THAT THERE IS A

REASONABLE BASIS TO DETERMINE THAT A RECOMMENDATION IS

SUITABLE. THE REVIEW PROCEDURES MAY APPLY A SCREENING

SYSTEM FOR THE PURPOSE OF IDENTIFYING SELECTED

TRANSACTIONS FOR ADDITIONAL REVIEW AND MAY BE

ACCOMPLISHED ELECTRONICALLY OR THROUGH OTHER MEANS,

INCLUDING, BUT NOT LIMITED TO, PHYSICAL REVIEW. THE

ELECTRONIC OR OTHER SYSTEM MAY BE DESIGNED TO REQUIRE

ADDITIONAL REVIEW ONLY FOR THOSE TRANSACTIONS IDENTIFIED

FOR ADDITIONAL REVIEW BY THE SELECTION CRITERIA.

(V) THE INSURER SHALL MAINTAIN REASONABLE PROCEDURES

TO DETECT RECOMMENDATIONS THAT ARE NOT SUITABLE,

INCLUDING, BUT IS NOT LIMITED TO, CONFIRMATION OF

CONSUMER SUITABILITY INFORMATION, SYSTEMATIC CUSTOMER

SURVEYS, INTERVIEWS, CONFIRMATION LETTERS AND PROGRAMS OF

INTERNAL MONITORING. NOTHING IN THIS SUBPARAGRAPH SHALL

PREVENT AN INSURER FROM COMPLYING WITH THIS SUBPARAGRAPH

BY APPLYING SAMPLING PROCEDURES OR BY CONFIRMING

SUITABILITY INFORMATION AFTER ISSUANCE OR DELIVERY OF THE

ANNUITY.

(VI) THE INSURER SHALL ANNUALLY PROVIDE A REPORT

DETAILING ITS SUPERVISION SYSTEM TO SENIOR MANAGEMENT,

INCLUDING TO THE SENIOR MANAGER RESPONSIBLE FOR AUDIT

FUNCTIONS. THE REPORT SHALL INCLUDE A DESCRIPTION OF THE

TESTING DESIGNED TO DETERMINE THE EFFECTIVENESS OF THE

SUPERVISION SYSTEM, THE EXCEPTIONS FOUND AND CORRECTIVE

ACTION TAKEN OR RECOMMENDED, IF ANY.

(2) NOTHING IN THIS SUBSECTION SHALL RESTRICT AN INSURER

FROM CONTRACTING FOR PERFORMANCE OF A FUNCTION, INCLUDING

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MAINTENANCE OF PROCEDURES, REQUIRED UNDER PARAGRAPH (1). AN

INSURER IS RESPONSIBLE FOR TAKING APPROPRIATE CORRECTIVE

ACTION AND MAY BE SUBJECT TO SANCTIONS AND PENALTIES UNDER

SECTION 406-B REGARDLESS OF WHETHER THE INSURER CONTRACTS FOR

PERFORMANCE OF A FUNCTION AND REGARDLESS OF THE INSURER'S

COMPLIANCE WITH PARAGRAPH (3).

(3) AN INSURER'S SUPERVISION SYSTEM UNDER PARAGRAPH (1)

SHALL INCLUDE SUPERVISION OF CONTRACTUAL PERFORMANCE UNDER

PARAGRAPH (2), INCLUDING, BUT IS NOT LIMITED TO, THE

FOLLOWING:

(I) MONITORING AND, AS APPROPRIATE, CONDUCTING

AUDITS TO ASSURE THAT THE CONTRACTED FUNCTION IS PROPERLY

PERFORMED.

(II) ANNUALLY OBTAINING A CERTIFICATION FROM A

SENIOR MANAGER WHO HAS RESPONSIBILITY FOR THE CONTRACTED

FUNCTION THAT THE SENIOR MANAGER HAS A REASONABLE BASIS

TO REPRESENT, AND DOES REPRESENT, THAT THE FUNCTION IS

PROPERLY PERFORMED.

(4) AN INSURER IS NOT REQUIRED TO INCLUDE IN ITS SYSTEM

OF SUPERVISION AN INSURANCE PRODUCER'S RECOMMENDATIONS TO

CONSUMERS FOR PRODUCTS OTHER THAN THE ANNUITIES OFFERED BY

THE INSURER.

(D.1) DISSUASION.--AN INSURANCE PRODUCER MAY NOT DISSUADE,

OR ATTEMPT TO DISSUADE, A CONSUMER FROM:

(1) TRUTHFULLY RESPONDING TO AN INSURER'S REQUEST FOR

CONFIRMATION OF SUITABILITY INFORMATION.

(2) FILING A COMPLAINT.

(3) COOPERATING WITH THE INVESTIGATION OF A COMPLAINT.

(E) COMPLIANCE WITH OTHER RULES.--SALES MADE [BY AN

INSURANCE PRODUCER SUBJECT TO AND IN COMPLIANCE WITH THE

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FINANCIAL INDUSTRY REGULATORY AUTHORITY CONDUCT RULES PERTAINING

TO SUITABILITY SHALL SATISFY THE REQUIREMENTS UNDER THIS SECTION

FOR THE RECOMMENDATION OF ANNUITIES. NOTHING IN THIS SUBSECTION

SHALL LIMIT THE COMMISSIONER'S ABILITY TO ENFORCE THE PROVISIONS

OF THIS ARTICLE.] IN COMPLIANCE WITH FINRA REQUIREMENTS

PERTAINING TO SUITABILITY AND SUPERVISION OF ANNUITY

TRANSACTIONS SHALL SATISFY THE REQUIREMENTS UNDER THIS SECTION.

THIS SUBSECTION APPLIES TO FINRA BROKER-DEALER SALES OF

ANNUITIES IF THE SUITABILITY AND SUPERVISION IS SIMILAR TO THOSE

APPLIED TO VARIABLE ANNUITY SALES. HOWEVER, NOTHING IN THIS

SUBSECTION SHALL LIMIT THE COMMISSIONER'S ABILITY TO ENFORCE OR

INVESTIGATE THE PROVISIONS OF THIS ARTICLE. FOR THIS SUBSECTION

TO APPLY, AN INSURER SHALL:

(1) MONITOR THE FINRA MEMBER BROKER-DEALER USING

INFORMATION COLLECTED IN THE NORMAL COURSE OF AN INSURER'S

BUSINESS.

(2) PROVIDE TO THE FINRA MEMBER BROKER-DEALER

INFORMATION AND REPORTS WHICH ARE REASONABLY APPROPRIATE TO

ASSIST THE FINRA MEMBER BROKER-DEALER TO MAINTAIN ITS

SUPERVISION SYSTEM.

(F) INTERNAL AUDIT AND COMPLIANCE PROCEDURES.--NOTHING IN

THIS ARTICLE SHALL EXEMPT AN INSURER FROM THE INTERNAL AUDIT AND

COMPLIANCE PROCEDURE REQUIREMENTS UNDER SECTION 405-A.

SECTION 4. THE ACT IS AMENDED BY ADDING A SECTION TO READ:

SECTION 403.1-B. INSURANCE PRODUCER TRAINING.

(A) CONTINUING EDUCATION CREDITS.--AN INSURANCE PRODUCER WHO

HAS THE AUTHORITY TO SELL ANNUITIES SHALL COMPLETE AT LEAST FOUR

CONTINUING EDUCATION CREDITS IN AN ANNUITY TRAINING COURSE OR

COURSES COVERING THE FOLLOWING TOPICS:

(1) THE TYPES OF ANNUITIES AND VARIOUS CLASSIFICATIONS

20170HB0152PN3556 - 19 -

OF ANNUITIES.

(2) IDENTIFICATION OF THE PARTIES TO AN ANNUITY.

(3) HOW PRODUCT SPECIFIC ANNUITY CONTRACT FEATURES

AFFECT CONSUMERS.

(4) THE APPLICATION OF INCOME TAXATION OF QUALIFIED AND

NONQUALIFIED ANNUITIES.

(5) THE PRIMARY USES OF ANNUITIES.

(6) APPROPRIATE SALES PRACTICES, REPLACEMENT AND

DISCLOSURE REQUIREMENTS.

(B) COMPLIANCE.--THE CONTINUING EDUCATION CREDIT REQUIREMENT

UNDER SUBSECTION (A) SHALL BE MET ON OR BEFORE THE END OF THE

INSURANCE PRODUCER'S NEXT COMPLETE LICENSE PERIOD OCCURRING

AFTER THE EFFECTIVE DATE OF THIS SECTION. FOR INDIVIDUALS

LICENSED ON OR AFTER THE EFFECTIVE DATE OF THIS SECTION, THE

REQUIREMENT SHALL BE MET ON OR BEFORE THE END OF THE INSURANCE

PRODUCER'S FIRST LICENSE PERIOD.

REQUIREMENTS OF THIS SUBSECTION, IT SHALL COVER ALL TOPICS

LISTED UNDER SUBSECTION (A) AND MAY NOT CONTAIN ANY MARKETING

INFORMATION, PROVIDE TRAINING ON SALES TECHNIQUES OR PROVIDE

SPECIFIC INFORMATION ABOUT A PARTICULAR INSURER'S PRODUCTS.

ADDITIONAL TOPICS MAY BE OFFERED IN CONJUNCTION WITH AND IN

ADDITION TO THOSE REQUIRED.

(D) PROVIDER REGISTRATION.--A PROVIDER OF AN ANNUITY

TRAINING COURSE INTENDED TO COMPLY WITH THIS SUBSECTION SHALL

AND COMPLY WITH THE RULES AND GUIDELINES APPLICABLE TO INSURANCE

PRODUCER CONTINUING EDUCATION COURSES.

(E) COURSE METHOD.--ANNUITY TRAINING COURSES MAY BE

CONDUCTED AND COMPLETED BY CLASSROOM OR SELF-STUDY METHODS.

20170HB0152PN3556 - 20 -

(F) REPORTING REQUIREMENTS.--A CONTINUING EDUCATION PROVIDER

OF ANNUITY TRAINING SHALL COMPLY WITH REPORTING REQUIREMENTS AND

SHALL ISSUE CERTIFICATES OF COMPLETION.

(G) SATISFACTION IN OTHER STATES.--THE SATISFACTION OF THE

TRAINING REQUIREMENTS OF ANOTHER STATE THAT ARE SUBSTANTIALLY

SIMILAR TO THE PROVISIONS OF THIS SUBSECTION SHALL BE DEEMED TO

SATISFY THE TRAINING REQUIREMENTS OF THIS SUBSECTION FOR

RESIDENT AND NONRESIDENT PRODUCERS.

(H) VERIFICATION.--AN INSURER SHALL VERIFY THAT AN INSURANCE

PRODUCER HAS COMPLETED THE ANNUITY TRAINING COURSE REQUIRED

UNDER THIS SUBSECTION WITHIN THE TIME PERIOD SPECIFIED UNDER

SUBSECTION (B). AN INSURER MAY SATISFY ITS RESPONSIBILITY UNDER

THIS SUBSECTION BY OBTAINING CERTIFICATES OF COMPLETION OF THE

TRAINING COURSE OR OBTAINING REPORTS PROVIDED BY THE

COMMISSIONER-SPONSORED DATABASE SYSTEMS OR VENDORS OR FROM A

REASONABLY RELIABLE COMMERCIAL DATABASE VENDOR THAT HAS A

REPORTING ARRANGEMENT WITH APPROVED INSURANCE EDUCATION

PROVIDERS.

SECTION 5. SECTIONS 404-B AND 405-B OF THE ACT ARE AMENDED

TO READ:

SECTION 404-B. MITIGATION OF RESPONSIBILITY.

(A) CORRECTIVE ACTIONS.--[THE COMMISSIONER MAY ORDER:] AN

INSURER IS RESPONSIBLE FOR COMPLIANCE WITH THIS ARTICLE. IF A

VIOLATION OCCURS, EITHER BECAUSE OF THE ACTION OR INACTION OF AN

INSURER OR ITS INSURANCE PRODUCER, THE COMMISSIONER MAY ORDER:

(1) AN INSURER TO TAKE REASONABLY APPROPRIATE CORRECTIVE

ACTION FOR ANY CONSUMER HARMED BY THE INSURER'S OR BY ITS

INSURANCE PRODUCER'S VIOLATION OF THIS ARTICLE.

[(2) AN INSURANCE PRODUCER TO TAKE REASONABLY

APPROPRIATE CORRECTIVE ACTION FOR ANY CONSUMER HARMED BY THE

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INSURANCE PRODUCER'S VIOLATION OF THIS ARTICLE.]

(3) [A] AN EXCLUSIVE GENERAL AGENT [OR INDEPENDENT

AGENCY THAT EMPLOYS OR CONTRACTS WITH AN INSURANCE PRODUCER

TO SELL OR SOLICIT THE SALE OF ANNUITIES TO CONSUMERS] OR THE

INSURANCE PRODUCER TO TAKE REASONABLY APPROPRIATE CORRECTIVE

ACTION FOR ANY CONSUMER HARMED BY THE [INSURANCE PRODUCER'S]

LICENSEE'S VIOLATION OF THIS ARTICLE.

(4) PENALTIES AND REMEDIES UNDER SECTION 406-B.

(B) REDUCTION OF PENALTY.--ANY APPLICABLE PENALTY PERMITTED

UNDER SECTION 406-B FOR A VIOLATION OF THIS ARTICLE MAY BE

REDUCED OR ELIMINATED IF CORRECTIVE ACTION FOR THE CONSUMER WAS

TAKEN PROMPTLY AFTER A VIOLATION WAS DISCOVERED OR THE VIOLATION

WAS NOT PART OF A PATTERN OR PRACTICE.

SECTION 405-B. RECORDKEEPING.

(A) GENERAL RULE.--AN INSURER, EXCLUSIVE GENERAL AGENT[,

INDEPENDENT AGENCY] AND INSURANCE PRODUCER SHALL MAINTAIN OR BE

ABLE TO MAKE AVAILABLE TO THE COMMISSIONER RECORDS OF THE

INFORMATION COLLECTED FROM THE CONSUMER AND OTHER INFORMATION

USED IN MAKING THE RECOMMENDATIONS THAT WERE THE BASIS FOR THE

INSURANCE TRANSACTIONS FOR FIVE YEARS AFTER THE INSURANCE

TRANSACTION IS COMPLETED BY THE INSURER. AN INSURER IS PERMITTED

BUT SHALL NOT BE REQUIRED TO MAINTAIN DOCUMENTATION ON BEHALF OF

AN INSURANCE PRODUCER.

(B) FORM OF RECORDS.--RECORDS REQUIRED TO BE MAINTAINED

UNDER THIS ARTICLE MAY BE MAINTAINED IN PAPER, PHOTOGRAPHIC,

MICROPROCESS, MAGNETIC, MECHANICAL OR ELECTRONIC MEDIA OR BY ANY

PROCESS THAT ACCURATELY REPRODUCES THE ACTUAL DOCUMENT.

SECTION 6. THE ACT IS AMENDED BY ADDING A SECTION TO READ:

SECTION 408-B. REGULATIONS.

THE DEPARTMENT MAY PROMULGATE RULES AND REGULATIONS NECESSARY

20170HB0152PN3556 - 22 -

FOR THE ADMINISTRATION OF THIS ARTICLE.

SECTION 7. THIS ACT SHALL TAKE EFFECT IN 180 DAYS.

20170HB0152PN3556 - 23 -