Annuities - Best Interest Training FAQ for Licensees
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.
- Does the annuity training only apply to resident producers?
No. The training requirements apply to all producers, whether resident or non-resident. However, non-resident producers that satisfy substantially similar training requirements in their home state, satisfy the Michigan annuity training requirements.
- Does the annuity training apply to producers registered with the Financial Industry Regulatory Authority (FINRA)?
Yes, producers registered with FINRA who engage in the sale of annuities must complete a one-time 4-hour training course as required under Public Act 266. If the 4-hour training course was completed prior to June 29, 2021, to remain qualified to engage in the sale of annuities, the producer must complete either a one-time 4-credit training course approved on or after June 29, 2021, or a one-time 1-credit training course approved on or after June 29, 2021, which includes updated training content. Producers selling, soliciting, or negotiating variable life and variable annuity (VA) products are required to be licensed with the Variable Annuities line of authority and be registered with FINRA.
- Is the annuity training requirement a continuing education (CE) requirement?
No, this is a training requirement to sell an annuity product. Resident producers, who take the 4-hour or 1-hour credit course, may use the credits to satisfy their overall CE requirements. Credits used to satisfy CE requirements will be counted as general credits. The annuity training course must be from an approved Michigan CE Provider, and the course must comply with guidelines applicable to CE courses as published in Chapter 12 of the Insurance Code. The annuity training course can be classroom or self-study and must meet the requirements of Chapter 12 as well.
- If I complete an annuity training course before the effective date of Public Act 266, will it 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 requirements of PA 266 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?
The topics are listed in Public Act 266, Section 4160(4) of the Insurance Code which requires the training must include information on all of the following:
- The types of annuities and various classifications of annuities.
- Identification of the parties to an annuity.
- How fixed, variable, and indexed annuity contract provisions affect consumers.
- The income taxation of qualified and nonqualified annuities.
- The primary uses of annuities.
- Appropriate standard of conduct, sales practices, and replacement and disclosure requirements.
Annuity training 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.
- Where can I find an approved annuity training CE course?
Annuities courses are listed in a searchable format on the Course Offerings section of the Insurance Entity Locator under Insurance Education. For Course Category, select Continuing Education (CE); for Classification or Type, select Annuities – Best Interest. This should return all the Annuities CE courses being offered to the public that meet the requirements of PA 266.
- Where can I find the disclosure requirements and the disclosure form?
For a copy of the FIS 2367 Insurance Agent (Producer) Disclosure for Annuities form.
The answers provided are not meant to be a substitute for legal advice.