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    v1.0.30
    OpenPayerPolicy UpdatesOther/IndeterminateIdaho DOI Annuity Suitability Policy Update | Open…
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    CurrentIdaho Department of InsurancePolicy N/A

    Suitability in Annuity Transactions

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    Governs recommended annuity purchases and exchanges, including suitability assessment, consumer information, supervision, producer training, recordkeeping, and compliance controls.

    Policy Summary
    PayerIdaho Department of Insurance
    PolicySuitability in Annuity Transactions
    Policy CodePolicy N/A
    Change TypeNo material change
    Effective DateJun 30, 2019
    Next Review DateN/A
    Key ActionComplete the required one-time, Department-approved four-credit annuity training before soliciting annuity sales.
    SourceLink
    POLICY UPDATE CHANGES

    No material clinical or coverage changes in this revision.

    36 monthsExchange lookback
    4 CE creditsRequired training
    6 monthsExisting producer deadline
    21 daysRecord transfer deadline
    In forceRecord retention

    OpenPayer is powered by Trek Health's payer performance platform. Trek continuously ingests, validates, and normalizes Transparency in Coverage data alongside payer policies and other commercial payer data to create a structured payer intelligence foundation. OpenPayer uses this foundation to deliver personalized search results, dynamically generated policy pages, and tailored policy monitoring based on each user's payers, specialties, billing codes, and areas of interest. The same intelligence powers broader payer performance workflows, including reimbursement benchmarking, contract evaluation, payer negotiations, and financial decision-making.

    Annuity Suitability and Transaction Requirements

    Suitability requirements for recommended transactions

    A recommended annuity purchase or exchange may proceed only when all suitability and reasonable-basis requirements are satisfied.

    ALL of the following

    • Recommendation and information

      • The recommendation results in an annuity purchase or exchange.
      • Reasonable efforts were made to obtain the consumer's suitability information before execution.
      • The recommendation is based on facts disclosed by the consumer, including suitability information and information about the consumer's investments, other insurance products, financial situation, and needs.

    • Consumer understanding and benefit

      • The consumer was reasonably informed about the annuity's material features, including any potential surrender period and surrender charge.
      • The consumer was informed of any potential tax penalty if the annuity is sold, exchanged, surrendered, or annuitized.
      • The consumer would benefit from applicable features, such as tax-deferred growth, annuitization, or death or living benefits.

    • Product suitability

      • The annuity as a whole is suitable for the particular consumer based on the consumer's suitability information.
      • The underlying subaccounts to which funds are allocated at purchase or exchange are suitable for the consumer.
      • Any riders and similar product enhancements are suitable for the consumer.
      • The insurer has a reasonable basis to believe the recommended annuity is suitable before issuing it.

    Additional exchange and replacement criteria

    Exchange and replacement transactions require all of the following additional reviews before proceeding.

    ALL of the following

    • Consider whether the consumer will incur a surrender charge.
    • Consider whether the consumer will be subject to a new surrender period.
    • Consider whether the consumer will lose existing death, living, or other contractual benefits.
    • Consider whether the consumer will be subject to increased fees, investment advisory fees, or charges for riders and similar product enhancements.
    • Consider whether the consumer would benefit from product enhancements and improvements.

    Transaction exemptions

    Unless specifically included, the rule does not apply to transactions involving any of the following categories.

    ANY of the following

    • A direct-response solicitation where no recommendation is made based on information collected from the consumer under the rule.
    • A contract used to fund an employee pension or welfare benefit plan covered by ERISA.
    • A plan described by Internal Revenue Code Sections 401(a), 401(k), 403(b), 408(k), or 408(p), if established or maintained by an employer.
    • A government or church plan defined in Internal Revenue Code Section 414, a government or church welfare benefit plan, or a deferred compensation plan of a state or local government or tax-exempt organization under Section 457.
    • A nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor.

    Exceptions to producer and insurer suitability obligations

    The producer and insurer have no obligation under the general suitability provisions when any of the following applies.

    ANY of the following

    • No recommendation is made.
    • A recommendation was made but was later found to have been prepared using materially inaccurate information provided by the consumer.
    • The consumer refuses to provide relevant suitability information and the annuity transaction is not recommended.
    • The consumer independently enters an annuity transaction that is not based on a recommendation by the producer or insurer.

    Producer eligibility to solicit or sell annuities

    A producer may solicit or sell an annuity only when all applicable knowledge, training, and timing requirements are met.

    ALL of the following

    • The producer has adequate knowledge of the annuity product to recommend it.
    • The producer complies with the insurer's standards for product training.
    • The producer has completed a one-time, Department-approved annuity training course provided by a Department-approved education provider.at least 4 CE credits
    • If the producer held a life insurance line of authority on the rule's effective date and wishes to sell annuities, the training requirements are completed within six months after the effective date.within 6 months after the rule's effective date

    Recordkeeping and compliance enforcement

    Insurers and producers must satisfy all applicable recordkeeping and compliance requirements.

    ALL of the following

    • Maintain records of all consumer information collected and other information used to make recommendations that were the basis for insurance transactions for as long as the transaction remains in force.

      Records must be maintained in a form or on media that accurately reproduces the original document and must be available to the Director.

    • If the producer's appointment is terminated or the producer's license is suspended or revoked, remit copies of all required records to the insurer within 21 days of the termination or license-status change.within 21 days

    • When a violation occurs

      • The insurer takes reasonably appropriate corrective action for a consumer harmed by the insurer's or producer's violation.

    Key Timeframes and Training Thresholds

    Prior Exchange or Replacement Review
    Review periodPreceding 36 months
    Applies toAnnuity exchanges or replacements
    Required considerationWhether the consumer has had another annuity exchange or replacement during the period
    Annuity Training Duration
    Minimum durationAt least 4 CE credits
    Course standardThe training must qualify for at least four continuing-education credits
    Permitted durationThe training may be longer than four CE credits

    Producer and Insurer Compliance Duties

    Documentation Required

    Establish a Reasonable Suitability Basis

    Before recommending an annuity purchase or an exchange resulting in another insurance transaction, the producer or insurer must have a reasonable basis to believe the recommendation is suitable from the consumer's disclosed suitability information, investments, other insurance products, financial situation, and needs. The basis must address the annuity as a whole, applicable subaccounts and riders, and whether the consumer would benefit from features such as tax-deferred growth, annuitization, or death or living benefits.

    • Consider material costs and risks, including mortality and expense fees, investment advisory fees, rider charges, limitations on interest returns, insurance and investment components, and market risk.
    Documentation Required

    Collect Suitability Information Before Execution

    Before executing a recommended annuity purchase, exchange, or replacement, the producer—or the insurer when no producer is involved—must make reasonable efforts to obtain the consumer's suitability information.

    • An insurer may not issue a recommended annuity unless there is a reasonable basis to believe it is suitable, except as provided by the rule's limited exceptions.

    Defined Terms

    Annuity
    ProductAn insurance product under state law
    SolicitationIndividually solicited
    ClassificationMay be classified as an individual or group annuity
    Continuing Education Credit
    MeaningOne continuing education credit
    Applicable ruleDescribed in IDAPA 18.06.04, Continuing Education
    UseProvides the credit measure for applicable continuing-education requirements
    Policy Summary
    PayerIdaho Department of Insurance
    PolicySuitability in Annuity Transactions
    Policy CodePolicy N/A
    Change TypeNo material change
    Effective DateJun 30, 2019
    Next Review DateN/A
    Key ActionComplete the required one-time, Department-approved four-credit annuity training before soliciting annuity sales.
    SourceLink
    On This Page
    Annuity Suitability and Transaction RequirementsKey Timeframes and Training ThresholdsProducer and Insurer Compliance DutiesDefined Terms
    Review whether the consumer has had another annuity exchange or replacement, particularly one within the preceding 36 months.
  1. Determine that the exchange or replacement is suitable for the consumer.
  2. A settlement or assumption of liabilities associated with personal injury litigation or a dispute or claim resolution process.
  3. A formal prepaid funeral contract.
  4. A prepaid contract used to fund funeral and related funeral expenses governed by Idaho Code Sections 54-1131 et seq.
  5. If the producer obtained a life insurance line of authority on or after the rule's effective date, the required annuity training course is completed before annuity sales begin.
    6. The general agency, independent agency, or producer takes reasonably appropriate corrective action for a consumer harmed by the producer's violation.
  6. Appropriate penalties and sanctions are imposed.
    7. Existing Life Producer Transition
    Transition period6 months after the rule’s effective date
    Applies toProducers who held a life insurance line of authority on the effective date
    ConditionThe producer must complete the annuity training requirements before selling annuities
    Required Annuity Training
    Course frequencyOne-time course
    Course lengthAt least four continuing-education credits
    Approval requirementThe course must be approved by the Department and provided by a Department-approved education provider
    Existing Producer Training Deadline
    DeadlineWithin six months after the rule’s effective date
    Affected producersExisting life-insurance producers who want to sell annuities
    Sales restrictionThe training requirements must be completed before the producer sells annuities
    Record Transfer Deadline
    Transfer deadlineWithin 21 days
    Triggering eventsAppointment termination, or suspension or revocation of the producer’s license
    Records transferredCopies of all records required under the rule
    Note

    Explain Material Annuity Features

    The consumer must be reasonably informed of the annuity's material features before purchase or exchange, including the potential surrender period and surrender charge and any potential tax penalty if the consumer sells, exchanges, surrenders, or annuitizes the annuity.

    • Explain other material features, including costs, rider charges, interest-return limitations, insurance and investment components, and market risk.
    Prior Authorization

    Evaluate Exchange and Replacement Consequences

    For an annuity exchange or replacement, the producer or insurer must determine that the transaction is suitable and consider its effects on the consumer before proceeding.

    • Determine whether the consumer will incur a surrender charge, begin a new surrender period, lose death, living, or other contractual benefits, or incur increased fees, investment advisory fees, rider charges, or similar expenses.
    • Consider whether the consumer would benefit from product enhancements or improvements.
    • Consider whether the consumer has had another annuity exchange or replacement, particularly one within the preceding 36 months.
    Documentation Required

    Document Recommendations and Consumer Refusals

    At the time of sale, the producer—or the responsible insurer representative when no producer is involved—must document each recommendation subject to the suitability rule.

    • Obtain a signed consumer statement documenting any refusal to provide suitability information.
    • If the consumer proceeds with an annuity transaction that is not based on the producer's or insurer's recommendation, obtain a signed statement acknowledging that the transaction was not recommended.
    Documentation Required

    Supervise Annuity Recommendations

    The insurer must establish and maintain a supervision system reasonably designed to achieve the insurer's and producers' compliance with the rule. The system must inform producers of the requirements, incorporate them into relevant training manuals, establish product-training standards, provide product-specific training explaining material features, and review recommendations before issuance to identify suitable transactions.

    • Maintain procedures to detect unsuitable recommendations through methods such as suitability-information confirmation, customer surveys, interviews, confirmation letters, internal monitoring, sampling, or post-issuance confirmation.
    • Annually report to senior management, including audit personnel, on testing of supervision-system effectiveness, exceptions, and corrective actions.
    • Supervise producer compliance with the training requirements in Section 016.
    Documentation Required

    Oversee Contracted Compliance Functions

    An insurer may contract out functions required by its supervision system, but remains responsible for appropriate corrective action and may be subject to sanctions and penalties whether or not it contracted for the function.

    • Monitor and, when appropriate, audit the contracted function.
    • Obtain an annual certification from the responsible senior manager that the contracted function is properly performed.

    Unsupported block type: denial_risk

    Note

    Apply the FINRA Compliance Pathway

    Sales made in compliance with FINRA suitability and supervision requirements reflected in FINRA Rule 2111 satisfy this rule for FINRA broker-dealer sales of variable annuities and fixed annuities when the suitability and supervision are similar to those applied to variable-annuity sales. This pathway does not limit the Director's authority to enforce or investigate compliance.

    • The insurer must monitor the FINRA member broker-dealer using information collected in the ordinary course of the insurer's business.
    • The insurer must provide reasonably appropriate information and reports to assist the FINRA member broker-dealer in maintaining its supervision system.
    Prior Authorization

    Require Producer Product Knowledge Before Solicitation

    A producer may not solicit an annuity unless the producer has adequate knowledge of the product to recommend it and complies with the insurer's product-training standards. The producer may rely on insurer-provided, product-specific training standards and materials when meeting this requirement.

    • Insurers must establish and maintain standards and procedures for producer product training.

    Unsupported block type: prior_auth

    Prior Authorization

    Complete Required Annuity Training

    Each producer who engages in annuity sales must complete a one-time, Department-approved, four-credit annuity training course provided by a Department-approved education provider. Producers who obtained a life-insurance line of authority on or after the rule's effective date may not sell annuities until completing the course; existing life producers were required to complete it within six months of the effective date.

    • The course must qualify for at least four continuing-education credits, although it may be longer.
    • Substantially similar annuity training completed in another state satisfies Idaho's requirement.
    Note

    Meet Training Content and Provider Requirements

    Annuity training must cover the prescribed outline and may include additional topics, but a compliant course may not include marketing information, sales techniques, or information specific to a particular insurer's products.

    • Required topics include annuity types and classifications; parties to an annuity; effects of fixed, variable, and indexed provisions on consumers; taxation of qualified and non-qualified annuities; primary uses of annuities; and appropriate sales practices, replacement, and disclosure requirements.
    • The course provider must cover every topic in the prescribed outline.
    • The provider must register as an Idaho continuing-education provider and comply with IDAPA 18.01.53 producer-education rules and guidelines.
    Documentation Required

    Document Training Delivery and Completion

    Annuity training may be completed in a classroom or through self-study in accordance with IDAPA 18.06.04. Providers must comply with applicable reporting requirements and issue certificates of completion.

    • Use completion reporting and documentation that permits the insurer to verify the producer's training before sales are permitted.

    Unsupported block type: documentation

    Documentation Required

    Transfer Records Within 21 Days

    If a producer's appointment is terminated or the producer's license is suspended or revoked, the producer must remit copies of all required records to the insurer within 21 days of the termination or change in license status.

    • Transfer the consumer and recommendation records described in Section 021.01.
    Denial Risk

    Correct Violations and Address Sanctions

    The Director may order corrective action when a violation harms a consumer, including action by the insurer, general or independent agency, or producer, and may impose appropriate penalties and sanctions.

    • The insurer is responsible for compliance with the rule, including violations caused by the insurer's or producer's action or inaction.
    • A violation is a violation of Idaho Code §41-1940.
    • A penalty under Idaho Code §41-117 may be reduced or eliminated when consumer corrective action is prompt or the violation was not part of a pattern or practice.
    Continuing Education Provider
    ProviderAn individual or entity
    Approval statusApproved to offer continuing education courses
    Applicable ruleApproval is pursuant to IDAPA 18.06.04, Continuing Education
    FINRA
    OrganizationFinancial Industry Regulatory Authority
    AbbreviationFINRA
    SuccessorIncludes a succeeding agency
    Insurer
    EntityA company required to be licensed under Idaho law
    PurposeProvides insurance products
    Included productsInsurance products including annuities
    Producer
    PersonA person required to be licensed under Idaho law
    Permitted activitiesSells, solicits, or negotiates insurance
    Included productsInsurance including annuities
    Recommendation
    NatureAdvice provided to an individual consumer
    ProviderAdvice from a producer or an insurer
    ResultThe advice results in an annuity purchase, exchange, or replacement in accordance with that advice
    Replacement
    TransactionA transaction in which a new policy or contract is purchased
    Existing contract actionThe existing policy or contract is lapsed, forfeited, surrendered, partially surrendered, assigned, or otherwise terminated
    Other effectsThe existing policy or contract may be converted, reduced in value, amended to reduce benefits or duration, reissued with reduced cash value, or used in a financed purchase
    Suitability Information
    PurposeInformation reasonably appropriate to determine the suitability of a recommendation
    Consumer factorsAge and annual income
    Financial factorsFinancial situation and funding resources, financial experience, financial objectives, intended use, time horizon, existing assets, liquidity needs, liquid net worth, risk tolerance, and tax status