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Annuity Suitability Training FAQ for CE Providers

Annuity Suitability Training FAQ for CE Providers

Posted 12/07/21

Public Act 266 requires a producer who engages in the sale of annuities to complete updated annuity training to sell annuities.  This training includes information about appropriate standards of conduct, sales practices, replacement, and disclosure requirements.

Producers licensed on or after June 29, 2021, must complete a one-time, 4-hour training course before selling annuities. 

Producers licensed prior to June 29, 2021, that were previously authorized to sell annuities, must complete either the one-time, 4-hour course or a one-time, 1-hour refresher course to continue selling annuities.  Training must be completed between June 29, 2021, and December 29, 2021.

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.

Frequently Asked Questions

  • 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 requirement applies 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.

    A substantially similar course meets the requirements of the NAIC model regulation 275 of 2020.

     

  • How long does an insurance producer who was previously authorized to recommend or sell annuities have to take the one-time, 1-hour refresher course to continue selling annuities?

    Training must be completed between June 29, 2021, and December 29, 2021. All 1-hour courses will expire after December 29, 2021, and will no longer be offered.

  • Does the annuity training apply to producers registered with the Financial Industry Regulatory Authority (FINRA)?

    Yes. The training includes updated content.

    Producers registered with FINRA that were licensed on or after June 29, 2021, must complete a one-time, 4-hour training course as required under Public Act 266 before selling annuities.

    FINRA registered producers licensed prior to June 29, 2021, that were previously authorized to sell annuities, must meet this new training requirement by completing either the one-time, 4-hour course or a one-time, 1-hour refresher course to continue selling annuities. Training must be completed between June 29, 2021, and December 29, 2021.

    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 recommend or sell annuity products.

    Resident producers, who take the 4-hour or 1-hour credit course, may use the credits to satisfy their overall CE requirements. If used, credits will be counted as general credits.

    The course must be from a Michigan approved CE provider and comply with requirements published in Chapter 12 of the Insurance Code. The training can be classroom or self-study.

  • 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.

  • If a producer already completed the new training in another state, will they have to retake the training in every state where they may recommend or sell annuities?

    No, completion of a substantially similar training in one state satisfies the training requirement in other states Producers are not required to take the new training multiple times.

  • Can a producer requalify to recommend and sell annuities after failing to satisfy the training requirements of Public Act 266 within the six-month grace period?

    Yes, a producer who was previously authorized to recommend or sell annuities and did not take the 1-hour refresher course prior to December 29, 2021, can requalify to recommend and sell annuities by completing the new 4-hour course prior to recommending or selling annuities.

  • 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.

  • Where can I find an approved annuity training CE course?

    Annuities courses are listed in a searchable format in the Course Offerings section of the "Insurance Education" locators. 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.