Annuity Suitability Training FAQ for CE Providers

  • Annuity Suitability Training FAQ for CE Providers

    Posted 05/04/21

    Public Act 266 requires a producer who engages in the sale of annuities to complete a one-time 4-hour annuity training course.  If a producer completed an annuity training course approved by the director prior to June 29, 2021, the producer must complete one of the following:  a) a new 4-credit training course approved by the director for use on or after June 29, 2021, or b) an additional one-time 1-credit training course approved by the director for use on or after June 29, 2021, on appropriate standards of conduct, sales practices, replacement, and disclosure requirements.

    Insurers are responsible to provide product-specific training and training materials that explain all material features of annuity products to their producers. Insurers shall verify that their producers have completed the annuity training requirements before allowing the producer to sell an annuity for that insurer.

    A producer, when making a recommendation of an annuity, shall 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 interest. Producers must attempt to obtain consumer profile information, which includes but is not limited to:  age, annual income, financial situation and needs, including debts and other obligations, financial experience, insurance needs, financial objectives, intended use of the annuity, financial time horizon, existing assets or financial products, including investment, annuity, and insurance holdings, liquidity needs, liquid net worth, risk tolerance, including, but not limited to, willingness to accept nonguaranteed elements in the annuity, financial resources used to fund the annuity, and tax status.

    The reasonability of a recommended annuity purchase must be based on several factors. In addition, for an exchange or replacement annuity, the producer must also take into consideration any surrender charge or the beginning of a new surrender period, loss of existing benefits, or other contractual benefits, or be subject to increased fees, investment advisory fees, or charges for riders and similar product enhancement, the belief that the consumer would benefit from the replacing product, or whether the product had been replaced or exchanged in the preceding 60 months.

What are the new training requirements for insurance producers to sell annuity products in Michigan?

Producers who become licensed by DIFS on or after June 29, 2021, must complete a 1-time 4-credit training course approved by the Director (approved on or after June 29, 2021) before engaging in the sale of annuities.

Producers who engage in the sale of annuities and who have completed an annuity training course approved by the Director of the Department of Insurance and Financial Services prior to June 29, 2021, must take either a new 4-credit training course, or an additional 1-time 1-credit training course. The courses must be approved on or after June 29, 2021 to meet the training requirement. (Courses approved on or after June 29, 2021 will include additional information that was not previously required.) The deadline to complete this training is December 29, 2021.

Will completion of an annuity training course before the effective date of Public Act 266, be accepted as meeting the requirements of the Act?

No. If the annuity training course(s) is taken prior to June 29, 2021 (has an approval date of June 28, 2021 or before), the Annuities Suitability requirement will not be fully met. The licensee would need to complete either a 4-hour or a 1-hour Annuities course approved on or after June 29, 2021 to be compliant with the requirements of the Act. Courses that meet the requirements of the Act will have a course type of Annuities – Best Interest.

Does a producer need to keep a certificate of completion of the training course?

Yes.  Producers should keep course completion certificates to verify course completion.  DIFS tracks completion of CE, but it is the responsibility of an insurer to verify a producer has completed the annuity training course(s).  An insurer may satisfy this responsibility by obtaining:

  • Reports from a director-sponsored database system.
  • Reports from a reasonably reliable commercial database vendor that has a reporting arrangement with a registered insurance producer program of study.
  • Course completion certificates from a producer.
What topics must be covered by an annuity training course?

Annuity training (new 4-credit course) shall cover all topics 1 to 6, shall not present any marketing information or 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 the topics in Public Act 266.

The 1-credit course must include instruction on appropriate standard of conduct, sales practices, replacement, and disclosure requirements under Chapter 41 of the Code.

  1. The types of annuities and various classifications of annuities.
  2. Identification of the parties to an annuity.
  3. How fixed, variable, and indexed annuity contract provisions affect consumers.
  4. The income taxation of qualified and nonqualified annuities.
  5. The primary uses of annuities.
  6. Appropriate standard of conduct, sales practices, and replacement and disclosure requirements.
Will a new course category be created for courses that meet the new Annuity Suitability requirements?

Yes. To accommodate the transition to the new NAIC Suitability in Annuities model act, and the Michigan legislative changes, all annuities CE courses that are currently approved, will expire on June 28, 2021.  A new course type called Annuities – Best Interest will be created and only annuities courses meeting the requirements of PA 266 will be approved with this course type.

How can I request a review of an already approved Annuities course that I feel will meet the new requirements?

If you believe a course that is currently approved will meet the new requirements, you may submit a request to PSI asking for an evaluation of the course based on the new requirements. No fee will be charged for this review. For reapproval of a course, PSI must receive your cover letter along with the pertinent information described below by May 28, 2021.

  • For classroom course reapproval, PSI will need a cover letter along with the approved content outline. 
  • For self-study or online course reapproval, PSI will need a cover letter along with the approved table of contents with page allocations. 

If a course submitted for reapproval is determined to meet the new statutory requirements, the course will be reapproved, showing an approval date of June 29, 2021.

Are there special instructions for submitting new or modified courses to meet the new annuities training requirements?

No. To submit new courses or courses with modified content, follow the normal submission method for review and approval (see Continuing Education (CE) Provider Process on the Licensing webpage).  Courses approved to meet the new requirements will be dated June 29, 2021.  To submit a new course to PSI for annuity approval, the course must meet the statutory requirements; check the Life Course Concentration, and the Annuities box under the Course Topics on the FIS 0406 application.

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    The answers provided are not meant to be a substitute for legal advice.