ODI Updates Annuity Rules to Now Include Best Interest Standard; New Education Requirement

ODI Updates Annuity Rules to Now Include Best Interest Standard; New Education Requirement
The Ohio Department of Insurance (ODI) has made changes to Ohio’s suitability rules for annuity transactions. With former Director Froment serving as the chair of the National Association of Insurance Commissioner’s (NAIC) Annuity Suitability Working group, Ohio has been at the forefront of incorporating the changes adopted at the national level by the NAIC. The changes, contained in OAC 3901-6-13 Suitability in annuity transactions, establish a best interest standard of conduct for agents and insurers. This new standard of conduct is more than the previous suitability standard, but it is not a fiduciary standard. Under this new standard of conduct, when making a recommendation of an annuity, a producer or insurer must act in the best interest of the consumer under the circumstances known at the time the recommendation is made, without placing the producer’s or the insurer’s financial interest ahead of the consumer’s financial interest.

Prior to the adoption of this rule, OIA worked in conjunction with the Big “I” to urge ODI to make improvements to their suggested changes. While some of our changes were incorporated, the “best interest” language was ultimately retained so that Ohio’s rule will mirror the national model.

While the updated rule took effect Feb. 14th, insurers and agents have six months after the effective date to comply. As part of the rule update, agents who already sell annuities (and have completed the four-hour one-time annuity training requirement prior to Feb. 14) will have to complete an additional one-time one credit training course on appropriate sales practices, replacement and disclosure requirements by August 14th in order to be in compliance.

OIA will provide more information to agents who sell annuities on how to comply with this rule as it becomes available. Forthcoming guidance is expected from ODI, including an FAQ to help agents and companies understand their obligations.

Questions? Contact OIA’s Government Affairs Manager Carolyn Mangas.

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