Fiduciary/Best Interest Development
- Effective January 1, 2023, Minnesota enacted a law governing the duties of insurers and producers similar to the NAIC model rule (discussed below).
- It provides that in recommending the purchase or exchange of an annuity to a consumer that results in an insurance transaction, the insurance producer, or the insurer where no producer is involved, must have reasonable grounds for believing the recommendation is suitable for the consumer based on the facts, including suitability information provided by the consumer about the customer’s investments, other insurance products, financial situation and needs.
- The consumer must be reasonably informed of the various features of the annuity (surrender charges and periods, fees, product enhancements, etc.).
- The law imposes a care obligation, disclosure obligation, conflict of interest obligation and documentation obligation.
- The care obligation requires that the insurance producer exercise reasonable diligence, care and skill in making the recommendation taking into account the consumer’s financial situation, insurance, needs, financial objectives and the available options.
- Prior to recommending an annuity, the insurance producer must prominently disclose to the consumer: the scope and terms of the relationship with the consumer and the role of the insurance producer in the transaction; a description of the compensation to be received by the insurance intermediary and notice of the consumer’s right to request additional information about the compensation.
- At the time of the recommendation or sale, the insurance producer must make a written record of any recommendation and the basis for the recommendation and obtain a signed statement from the consumer if the consumer refuses to provide or provides insufficient consumer profile information.
- The insurance producer must identify and avoid or reasonably manage and disclose material conflicts of interest.
- The insurer must maintain reasonable procedures to ensure compliance with these requirements.
Sources
Sec. 72A.2032, Duties of Insurers and Insurance Producers
MN LEGIS 84 (2022)