Ohio Admin. Code 3901-6-13 - Suitability in annuity transactions
(A)
Purpose
(1)
The purpose of
this rule is to require insurance agents, as defined in this rule, to act in
the best interest of the consumer when making a recommendation of an annuity
and to require insurers, including fraternal benefit societies, to establish
and maintain a system to supervise recommendations so that the insurance needs
and financial objectives of consumers, at the time of the transaction, are
effectively addressed.
(2)
This rule will bring Ohio law into compliance with the
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Public Law
Number 111-203, 111th Cong., 2d sess. (July 21, 2010).
(B)
Authority
This rule is adopted pursuant to the authority vested in the superintendent under sections 3901.041 and 3901.19 to 3901.26 of the Revised Code.
(C)
Scope
(1)
This rule shall apply to any sale or recommendation of
an annuity.
(2)
Nothing herein shall be construed to create or imply a
private cause of action for a violation of this rule or to subject an insurance
agent to civil liability under the best interest standard of care outlined in
this rule or under standards governing the conduct of a fiduciary or a
fiduciary relationship.
(D)
Exemptions
Unless otherwise specifically included, this rule shall not apply to transactions involving:
(1)
Direct response
solicitations where there is no recommendation based on information collected
from the consumer pursuant to this rule;
(2)
Contracts used to
fund:
(a)
An
employee pension or welfare benefit plan that is covered by the "Employee
Retirement and Income Security Act" (ERISA);
(b)
A plan described
by sections 401(a),
401(k),
403(b),
408(k) or
408(p) of the Internal
Revenue Code, as amended, if established or maintained by an
employer;
(c)
A government or church plan defined in section
414 of the Internal Revenue Code, 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 of the Internal Revenue Code;
or
(d)
A nonqualified deferred compensation arrangement
established or maintained by an employer or plan sponsor.
(3)
Settlements of or assumptions of liabilities associated with
personal injury litigation or any dispute or claim resolution process;
or
(4)
Formal pre-need funeral contracts, as defined in
division (T) of section
4717.01 of the Revised Code,
provided the consideration paid to purchase, exchange or replace the annuity is
reasonable related to the price of the pre-need funeral contract, and a
pre-need funeral contract is in place at the time the annuity is purchased,
exchanged or replaced.
(E)
Definitions
(1)
"Annuity" means
an annuity that is an insurance product under state law that is individually
solicited, whether the product is classified as an individual or group
annuity.
(2)
"Cash compensation" means any discount, concession,
fee, service fee, commission, sales charge, loan, override, or cash benefit
received by an insurance agent in connection with the recommendation or sale of
an annuity from an insurer, intermediary, or directly from the
consumer.
(3)
"Consumer profile information" means information that
is reasonably appropriate to determine whether a recommendation addresses the
consumer's financial situation, insurance needs and financial objectives,
including, at a minimum, the following:
(a)
Age;
(b)
Annual income;
(c)
Financial
situation and needs, including debts and other obligations;
(d)
Financial
experience;
(e)
Insurance needs;
(f)
Financial
objectives;
(g)
Intended use of the annuity;
(h)
Financial time
horizon;
(i)
Existing assets or financial products, including
investment, annuity and insurance holdings;
(j)
Liquidity
needs;
(k)
Liquid net worth;
(l)
Risk tolerance,
including but not limited to, willingness to accept non-guaranteed elements in
the annuity;
(m)
Financial resources used to fund the annuity;
and
(n)
Tax status.
(4)
"Continuing
education credit" or "CE credit" means fifty minutes of educational instruction
that has been specifically approved to meet the agent annuity training
requirements of paragraph (G)(2) of this rule.
(5)
"Continuing
education provider" or "CE provider" means an individual or entity that is
approved to offer continuing education courses pursuant to rule
3901-5-02 of the Administrative
Code.
(6)
"FINRA" means the "Financial Industry Regulatory
Authority" or a succeeding agency.
(7)
"Insurer" means a
company, including a fraternal benefit society, required to be licensed under
the laws of this state to provide insurance products, including
annuities.
(8)
"Insurance agent" or "agent" means a person or entity
required to be licensed under the laws of this state to sell, solicit or
negotiate insurance, including annuities. For purposes of this rule, "insurance
agent" or "agent" include an insurer where no insurance agent is
involved.
(9)
"Intermediary" means an entity contracted directly with
an insurer or with another entity contracted with an insurer to facilitate the
sale of the insurer's annuities by insurance agents.
(10)
"Material
conflict of interest" means a financial interest of the agent in the sale of an
annuity that a reasonable person would expect to influence the impartiality of
a recommendation. Material conflict of interest does not include cash
compensation or non-cash compensation.
(11)
"Non-cash
compensation" means any form of compensation that is not cash compensation,
including, but not limited to, health insurance, office rent, office support
and retirement benefits.
(12)
"Non-guaranteed elements" means the premiums, credited
interest rates (including any bonus), benefits, values, dividends, non-interest
based credits, charges or elements of formulas used to determine any of these,
that are subject to company discretion and are not guaranteed at issue. An
element is considered non-guaranteed if any of the underlying non-guaranteed
elements are used in its calculation.
(13)
"Recommendation"
means advice provided by an insurance agent to an individual consumer that was
intended to result or does result in a purchase, an exchange or a replacement
of an annuity in accordance with that advice. Recommendation does not include
general communication to the public, generalized customer services assistance
or administrative support, general educational information and tools,
prospectuses, or other product and sales material.
(14)
"Replacement"
means a transaction in which a new annuity is to be purchased, and it is known
or should be known to the proposing agent, or to the proposing insurer whether
or not an agent is involved, that by reason of the transaction, an existing
annuity or other insurance policy has been or is to be any of the
following:
(a)
Lapsed, forfeited, surrendered or partially surrendered,
assigned to the replacing insurer or otherwise terminated;
(b)
Converted to
reduced paid-up insurance, continued as extended term insurance, or otherwise
reduced in value by the use of nonforfeiture benefits or other policy
values;
(c)
Amended so as to effect either a reduction in benefits
or in the term for which coverage would otherwise remain in force or for which
benefits would be paid;
(d)
Reissued with any reduction in cash value;
or
(e)
Used in a financed purchase.
(15)
"SEC" means the
United States securities and exchange commission.
(F)
Duties of
insurers, including fraternal benefit societies and insurance agents
(1)
Best interest
obligations. An insurance agent, 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 agent's or the
insurer's financial interest ahead of the consumer's interest. An agent has
acted in the best interest of the consumer if they have satisfied the following
obligations regarding care, disclosure, conflict of interest and
documentation:
(a)
(i)
Care obligation.
The agent, in making a recommendation shall exercise reasonable diligence, care
and skill to:
(a)
Know the consumer's financial situation, insurance
needs and financial objectives;
(b)
Understand the
available recommendation options after making a reasonable inquiry into options
available to the agent;
(c)
Have a reasonable basis to believe the recommended
option effectively addresses the consumer's financial situation, insurance
needs and financial objectives over the life of the product, as evaluated in
light of the consumer profile information; and
(d)
Communicate the basis or
bases of the recommendation.
(ii)
The requirements
under paragraph (F)(1)(a)(i) of this rule include making reasonable efforts to
obtain consumer profile information from the consumer prior to the
recommendation of an annuity.
(iii)
The
requirements under paragraph (F)(1)(a)(i) of this rule require an agent to
consider the types of products the agent is authorized and licensed to
recommend or sell that address the consumer's financial situation, insurance
needs and financial objectives. This does not require analysis or consideration
of any products outside the authority and license of the agent or other
possible alternative products or strategies available in the market at the time
of the recommendation. Agents shall be held to standards applicable to agents
with similar authority and licensure.
(iv)
The requirements
under paragraph (F)(1) of this rule do not create a fiduciary obligation or
relationship and only create a regulatory obligation as established in this
rule.
(v)
The consumer profile information, characteristics of
the insurer, and product costs, rates, benefits and features are those factors
generally relevant in making a determination whether an annuity effectively
addresses the consumer's financial situation, insurance needs and financial
objectives, but the level of importance of each factor under the care
obligation of paragraph (F)(1)(a) of this rule may vary depending on the facts
and circumstances of a particular case. However, each factor may not be
considered in isolation.
(vi)
The requirements under paragraph (F)(1)(a)(i) of this
rule include having a reasonable basis to believe the consumer would benefit
from certain features of the annuity, such as annuitization, death or living
benefit or other insurance-related features.
(vii)
The
requirements under paragraph (F)(1)(a)(i) of this rule apply to the particular
annuity as a whole and the underlying subaccounts to which funds are allocated
at the time of purchase or exchange of an annuity, and riders and similar
product enhancements, if any.
(viii)
The
requirements under paragraph (F)(1)(a)(i) of this rule do not mean the annuity
with the lowest one-time or multiple occurrence compensation structure shall
necessarily be recommended.
(ix)
The requirements
under paragraph (F)(1)(a)(i) of this rule do not mean the agent has ongoing
monitoring obligations under the care obligation under this paragraph, although
such an obligation may be separately owed under the terms of a fiduciary,
consulting, investment advising or financial planning agreement between the
consumer and the agent.
(x)
In the case of an exchange or replacement of an
annuity, the agent shall consider the whole transaction, which includes taking
into consideration whether:
(a)
The consumer will incur a surrender charge, be subject
to the commencement of a new surrender period, lose existing benefits, such as
death, living or other contractual benefits, or be subject to increased fees,
investment advisory fees or charges for riders and similar product
enhancements;
(b)
The replacing product would substantially benefit the
consumer in comparison to the replaced product over the life of the product;
and
(c)
The consumer has had another annuity exchange or
replacement and, in particular, an exchange or replacement within the preceding
sixty months.
(xi)
Nothing in this rule should be construed to require an
agent to obtain any license other than an insurance agent license with the
appropriate line of authority to sell, solicit or negotiate insurance in this
state, including but not limited to any securities license, in order to fulfill
the duties and obligations contained in this rule; provided the agent does not
give advice or provide services that are otherwise subject to securities laws
or engage in any other activity requiring other professional
licenses.
(b)
Disclosure obligation.
(i)
Prior to the
recommendation or sale of an annuity, the agent shall prominently disclose to
the consumer on a form substantially similar to appendix A of this rule:
(a)
A description of
the scope and terms of the relationship with the consumer and the role of the
agent in the transaction;
(b)
An affirmative statement on whether the agent is
licensed and authorized to sell the following products:
(i)
Fixed
annuities;
(ii)
Fixed indexed annuities;
(iii)
Variable
annuities;
(iv)
Life insurance;
(v)
Mutual
funds;
(vi)
Stocks and bonds; and
(vii)
Certificates of
deposit.
(c)
An affirmative statement describing the insurers the
agent is authorized, contracted, appointed, or otherwise able to sell insurance
products for, using the following descriptions:
(i)
From one
insurer;
(ii)
From two or more insurers; or
(iii)
From two or
more insurers although primarily contracted with one insurer.
(d)
A
description of the sources and types of cash compensation and non-cash
compensation to be received by the agent, including whether the agent is to be
compensated for the sale of a recommended annuity by commission as part of
premium or other remuneration received from the insurer, intermediary or other
agent or by fee as a result of a contract for advice or consulting services;
and
(e)
A notice of the consumer's right to request additional
information regarding cash compensation described in paragraph (F)(1)(b)(ii) of
this rule.
(ii)
Upon request of the consumer or the consumer's
designated representative, the agent shall disclose:
(a)
A reasonable
estimate of the amount of cash compensation to be received by the agent, which
may be stated as a range of amounts or percentages; and
(b)
Whether the cash
compensation is a one-time or multiple occurrence amount, and if a multiple
occurrence amount, the frequency and amount of the occurrence, which may be
stated as a range of amounts or percentages.
(iii)
Prior to or at
the time of the recommendation or sale of an annuity, the agent shall have a
reasonable basis to believe the consumer has been informed of various features
of the annuity, such as the potential surrender period and surrender charge,
potential tax penalty if the consumer sells, exchanges, surrenders or
annuitizes the annuity, mortality and expense fees, investment advisory fees,
any annual fees, potential charges for and features of riders, or other options
of the annuity, limitations on interest returns, potential changes in
non-guaranteed elements of the annuity, insurance and investment components and
market risk.
(c)
Conflict of interest obligation. An agent shall
identify and avoid or reasonably manage and disclose material conflicts of
interest, including material conflicts of interest related to an ownership
interest.
(d)
Documentation obligation. An agent shall at the time of
recommendation or sale:
(i)
Make a written record of any recommendation and the
basis for the recommendation subject to this rule;
(ii)
Obtain a
consumer signed statement on a form substantially similar to appendix B of this
rule documenting:
(a)
A customer's refusal to provide the consumer profile
information, if any; and
(b)
A customer's understanding of the ramifications of not
providing his or her consumer profile information or providing insufficient
consumer profile information.
(iii)
Obtain a
consumer signed statement on a form substantially similar to appendix C of this
rule acknowledging the annuity transaction is not recommended if a customer
decides to enter into an annuity transaction that is not based on the agent's
recommendation.
(e)
Application of
the best interest obligation. Any requirement applicable to an agent under
paragraph (F)(1) of this rule shall apply to every agent who has exercised
material control or influence in the making of a recommendation and has
received direct compensation as a result of the recommendation or sale,
regardless of whether the agent has had any direct contact with the consumer.
Activities such as providing or delivering marketing or educational materials,
product wholesaling or other back office product support, and general
supervision of an agent do not, in and of themselves, constitute material
control or influence.
(2)
Transactions not
based on a recommendation.
(a)
Except as provided under paragraph (F)(2)(b) of this
rule, an insurance agent, shall have no obligation to a consumer under
paragraph (F)(1) of this rule related to any annuity transaction if:
(i)
No recommendation
is made;
(ii)
A recommendation was made and was later found to have
been prepared based on materially inaccurate information provided by the
consumer;
(iii)
A consumer refuses to provide relevant consumer profile
information and the annuity transaction is not recommended; or
(iv)
A consumer
decides to enter into an annuity transaction that is not based on a
recommendation of the insurance agent.
(b)
An insurer's
issuance of an annuity subject to paragraph (F)(2)(a) of this rule shall be
reasonable under all the circumstances actually known to the insurer at the
time the annuity is issued.
(3)
Supervision
system
(a)
Except as permitted under paragraph (F)(2) of this rule, an
insurer may not issue an annuity recommended to a consumer unless there is a
reasonable basis to believe the annuity would effectively address the
particular consumer's financial situation, insurance needs and financial
objectives based on the consumer's consumer profile
information.
(b)
An insurer shall establish and maintain a supervision
system that is reasonably designed to achieve the insurer's and its insurance
agents' compliance with this rule, including, but not limited to, the
following:
(i)
The insurer shall establish and maintain reasonable
procedures to inform its insurance agents of the requirements of this rule and
shall incorporate the requirements of this rule into relevant insurance agent
training manuals;
(ii)
The insurer shall establish and maintain standards for
insurance agent product training and shall establish and maintain reasonable
procedures to require its insurance agents to comply with the requirements of
paragraph (G) of this rule;
(iii)
The insurer
shall provide product-specific training and training materials that explain all
material features of its annuity products to its insurance
agents;
(iv)
The insurer shall establish and maintain procedures for
the review of each recommendation prior to issuance of an annuity that are
designed to ensure there is a reasonable basis to determine that the
recommended annuity would effectively address the particular consumer's
financial situation, insurance needs and financial objectives. Such review
procedures may apply a screening system for the purpose of identifying selected
transactions for additional review and may be accomplished electronically or
through other means including, but not limited to, physical review. Such an
electronic or other system may be designed to require additional review only of
those transactions identified for additional review by the selection
criteria;
(v)
The insurer shall establish and maintain reasonable
procedures to detect recommendations that are not in compliance with paragraphs
(F)(1), (F)(2), (F)(4), and (F)(5) of this rule. These may include, but are not
limited to, confirmation of consumer's consumer profile information, systematic
customer surveys, agent and consumer interviews, confirmation letters, agent
statements or attestations and programs of internal monitoring. Nothing in this
paragraph prevents an insurer from complying with this paragraph by applying
sampling procedures, or by confirming the consumer profile information or other
required information under paragraph (F) of this rule after issuance or
delivery of the annuity;
(vi)
The insurer shall establish and maintain reasonable
procedures to assess, prior to or upon issuance or delivery of an annuity,
whether an agent has provided to the consumer the information required to be
provided under paragraph (F) of this rule;
(vii)
The insurer
shall establish and maintain reasonable procedures to identify and address
suspicious consumer refusals to provide consumer profile
information;
(viii)
The insurer shall establish and maintain reasonable
procedures to identify and eliminate any sales contests, sales quotas, bonuses,
and non-cash compensation that are based on the sales of specific annuities
within a limited period of time. The requirements of this paragraph are not
intended to prohibit the receipt of health insurance, office rent, office
support, retirement benefits or other employee benefits by employees as long as
those benefits are not based upon the volume of sales of a specific annuity
within a limited period of time; and
(ix)
The insurer
shall annually provide a written report to senior management, including to the
senior manager responsible for audit functions, which details a review, with
appropriate testing, reasonably designed to determine the effectiveness of the
supervision system, the exceptions found, and corrective action taken or
recommended, if any.
(c)
(i)
Nothing in paragraph (F)(3) of this rule restricts an
insurer from contracting for performance of a function (including maintenance
of procedures) required under paragraph (F)(3) of this rule. An insurer is
responsible for taking appropriate corrective action and may be subject to
sanctions and penalties pursuant to paragraph (H) of this rule regardless of
whether the insurer contracts for performance of a function and regardless of
the insurer's compliance with paragraph (F)(3)(c)(ii) of this
rule.
(ii)
An insurer's supervision system under paragraph (F)(3)
of this rule shall include supervision of contractual performance under this
paragraph. This includes, but is not limited to, the following:
(a)
Monitoring and,
as appropriate, conducting audits to assure that the contracted function is
properly performed; and
(b)
Annually obtaining a certification from a senior
manager who has responsibility for the contracted function that the manager has
a reasonable basis to represent, and does represent, that the function is
properly performed.
(d)
An insurer is not
required to include in its system of supervision an insurance agent's
recommendations to consumers of products other than the annuities offered by
the insurer, or include consideration of or comparison to options available to
the agent or compensation relating to those options other than annuities or
other products offered by the insurer.
(4)
Prohibited
practices. Neither an agent nor an insurer shall dissuade, or attempt to
dissuade, a consumer from:
(a)
Truthfully responding to an insurer's request for
confirmation of the consumer profile information;
(b)
Filing a
complaint; or
(c)
Cooperating with the investigation of a
complaint.
(5)
Safe harbor
(a)
Recommendations and sales of annuities made in
compliance with comparable standards shall satisfy the requirements under this
rule. Paragraph (F)(5) of this rule applies to all recommendations and sales of
annuities made by financial professionals in compliance with business rules,
controls and procedures that satisfy a comparable standard even if such
standard would not otherwise apply to the product or recommendation at issue.
However, nothing in paragraph (F)(5) of this rule shall limit the
superintendent's ability to investigate and enforce the provisions of this
rule.
(b)
Nothing in paragraph (F)(5)(a) of this rule shall limit
the insurer's obligation to comply with paragraph (F)(3)(a) of this rule,
although the insurer may base its analysis on information received from either
the financial professional or the entity supervising the financial
professional.
(c)
For paragraph (F)(5)(a) of this rule to apply, an
insurer shall:
(i)
Monitor the relevant conduct of the financial
professional seeking to rely on paragraph (F)(5)(a) of this rule or the entity
responsible for supervising the financial professional, such as the financial
professional's broker-dealer or an investment adviser registered under federal
securities laws using information collected in the normal course of an
insurer's business; and
(ii)
Provide to the entity responsible for supervising the
financial professional seeking to rely on paragraph (F)(5)(a) of this rule,
such as the financial professional's broker-dealer or investment adviser
registered under federal securities laws, information and reports that are
reasonably appropriate to assist such entity to maintain its supervision
system.
(d)
For purposes of paragraph (F)(5) of this rule,
"financial professional" means an agent that is regulated and acting as:
(i)
A broker-dealer
registered under federal securities laws or a registered representative of a
broker-dealer;
(ii)
An investment adviser registered under federal
securities laws or an investment adviser representative associated with the
federal registered investment adviser; or
(iii)
A plan
fiduciary under section 3(21) of the Employee Retirement Income Security Act of
1974 (ERISA) or fiduciary under section
4975(e)(3) of the Internal
Revenue Code (IRC) or any amendments or successor statutes
thereto.
(e)
For purposes of paragraph (F)(5) of this rule,
"comparable standards" means:
(i)
With respect to broker-dealers and registered
representatives of broker-dealers, applicable SEC and FINRA rules pertaining to
best interest obligations and supervision of annuity recommendations and sales,
including, but not limited to, "Regulation Best Interest" and any amendments or
successor regulations thereto;
(ii)
With respect to
investment advisers registered under federal securities laws or investment
adviser representatives, the fiduciary duties and all other requirements
imposed on such investment advisers or investment adviser representatives by
contract or under the Investment Advisers Act of 1940, including but not
limited to, the form ADV and interpretations; and
(iii)
With respect to
plan fiduciaries or fiduciaries, means the duties, obligations, prohibitions
and all other requirements attendant to such status under ERISA or the IRC and
any amendments or successor statutes thereto.
(G)
Insurance agent training
(1)
An insurance
agent shall not solicit the sale of an annuity product unless the insurance
agent has adequate knowledge of the product to recommend the annuity and the
insurance agent is in compliance with the insurer's standards for product
training. An insurance agent may rely on insurer-provided product-specific
training standards and materials to comply with this paragraph.
(2)
In addition to
the requirements in paragraph (G)(1) of this rule, insurance agents subject to
this rule shall comply with the following continuing education
requirements:
(a)
An insurance agent who engages in the sale,
solicitation or negotiation of annuity products shall complete a one-time four
credit training course provided by a department of insurance approved
continuing education provider.
(b)
An insurance
agent who holds a life insurance line of authority on the effective date of
this rule and who desires to sell annuities shall complete the requirements of
paragraph (G)(2) within six months after the effective date of this rule.
Individuals who obtain a life insurance line of authority on or after the
effective date of this rule may not engage in the sale of annuities until the
annuity training course required under paragraph (G) (2) of this rule has been
completed.
(c)
The minimum length of the training required under
paragraph (G)(2) of this rule shall be sufficient to qualify for at least four
CE credits, but may be longer.
(d)
The training
required under paragraph (G)(2) of this rule shall include information on the
following topics:
(i)
The types of annuities and various classifications of
annuities;
(ii)
Identification of the parties to an
annuity;
(iii)
How product specific annuity contract features affect
consumers;
(iv)
The application of income taxation of qualified and
non-qualified annuities;
(v)
The primary uses of annuities; and
(vi)
Appropriate
standard of conduct, sales practices, replacement and disclosure
requirements.
(e)
Providers of courses intended to comply with paragraph
(G)(2) of this rule shall cover all topics listed in the prescribed outline and
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 required outline.
(f)
A provider of an annuity training course intended to
comply with paragraph(G)(2) (a) of this rule shall register as a CE provider in
this state and comply with the rules and guidelines applicable to insurance
agent and continuing education courses as set forth in rule
3901-5-02 of the Administrative
Code.
(g)
An agent who has completed an annuity training course
approved by the department of insurance prior to the effective date of this
rule shall, within six months after the effective date of this rule, complete
either:
(i)
A
new four credit training course approved by the department of insurance after
the effective date of this rule; or
(ii)
An additional
one-time one credit training course approved by the department of insurance and
provided by the department of insurance-approved education provider on
appropriate sales practices, replacement and disclosure requirements under this
amended rule.
(h)
Annuity training courses may be conducted and completed
by classroom or self-study methods in accordance with rule
3901-5-03 of the Administrative
Code.
(i)
Providers of annuity training shall comply with the
reporting requirements and shall issue certificates of completion in accordance
with rule
3901-5-04 of the Administrative
Code.
(j)
For Ohio non-resident agents, the satisfaction of the
training requirements of another state that are substantially similar to the
provisions of paragraph (G)(2)(a) of this rule shall be deemed to satisfy the
training requirements of paragraph (G)(2) of this rule in this
state.
(k)
The satisfaction of the components of the training
requirements of any course or courses with components substantially similar to
the provisions of paragraph (G)(2) of this rule shall be deemed to satisfy the
training requirements of paragraph (G)(2) of this rule in this
state.
(l)
An insurer shall verify that an insurance agent has
completed the four hour annuity training course required under paragraph (G)(2)
of this rule before allowing the agent to sell an annuity product for that
insurer. An insurer may satisfy its responsibility under paragraph (G)(2) of
this rule by obtaining certificates of completion of the training course or
obtaining reports provided by superintendent-sponsored database systems or
vendors or from a reasonably reliable commercial database vendor that has a
reporting arrangement with approved insurance education
providers.
(H)
Compliance
mitigation; penalties
(1)
An insurer is responsible for compliance with this
rule. If a violation occurs, either because of the action or inaction of the
insurer or its insurance agent, the superintendent may order:
(a)
An insurer to
take reasonably appropriate corrective action for any consumer harmed by a
failure to comply with this rule by the insurer, an entity contracted to
perform the insurer's supervisory duties or by its insurance
agent;
(b)
A general agency, business entity, independent agency
or the insurance agent to take reasonably appropriate corrective action for any
consumer harmed by the insurance agent's violation of this rule;
and
(c)
Appropriate penalties and sanctions.
(2)
Any
applicable penalty under the Unfair and Deceptive Trade Practices Act, sections
3911.19 to 3911.26 of the
Revised Code, for a violation of this rule may be reduced or eliminated if
corrective action for the consumer was taken promptly after a violation was
discovered or the violation was not part of a pattern or
practice.
(3)
The authority to enforce compliance with this rule is
vested exclusively in the superintendent of insurance.
(I)
Record
keeping
(1)
Insurers, independent agencies, business entity agents and
insurance agents shall maintain or be able to make available to the
superintendent records of the information collected from the consumer,
disclosures made to the consumer, including the summaries of oral disclosures,
and other information used in making the recommendations that were the basis
for insurance transactions for eight years after the insurance transaction is
completed by the insurer. An insurer is permitted, but shall not be required,
to maintain documentation on behalf of an insurance agent.
(2)
Records required
to be maintained by this rule may be maintained in paper, photographic,
micro-process, magnetic, mechanical or electronic media or by any process that
accurately reproduces the actual document.
(J)
Severability
If any paragraph, term or provision of this rule is adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other paragraph, term or provision of this rule, but the remaining paragraphs, terms and provisions shall be and continue in full force and effect.
(K)
Effective date
Insurers and insurance agents shall comply with the requirements of this rule within six months after the effective date of this rule.
Replaces: 3901-6-13
Notes
Promulgated Under: 119.03
Statutory Authority: 3901.041, 3901.19 to 3901.26
Rule Amplifies: 3901.19 to 3901.26
Prior Effective Dates: 03/01/2007, 01/01/2009, 07/01/2011, 02/14/2021
Promulgated Under: 119.03
Statutory Authority: 3901.041, 3901.19 to 3901.26
Rule Amplifies: 3901.19 to 3901.26
Prior Effective Dates: 03/01/2007, 01/01/2009, 07/01/2011
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