Fiduciary/Best Interest Development
- On March 30, 2022, Maryland adopted new regulations titled Suitability in Annuity Transactions based on the NAIC model (discussed below) which became effective October 8, 2022.
- The rule requires insurers to establish a system to supervise recommendations and set forth standards and procedures for each recommendation that results in a transaction involving an annuity product so that the insurance needs and financial objectives of the consumer are appropriately addressed.
- The rule applies to each recommendation to purchase, exchange or replace an annuity made to a consumer by an insurance producer or an insurer where no insurance producer is involved.
- In recommending the purchase, exchange or replacement of the annuity, the insurance producer or insurer must have reasonable grounds for believing the recommendation is suitable based on investment and financial information provided by the consumer and based on evaluation of the various features of the annuity (e.g., fees, expenses, limitation on interest returns, market risk, insurance and investment components, etc.).
- The rule does not apply to recommendations involving contracts used to fund certain retirement plans, including an ERISA plan, a tax-qualified retirement plan, governmental plans, church plans and nonqualified deferred compensation arrangements.
- The rule does not create a private cause of action for enforcing these new standards.
The Financial Protection Act of 2019