Ala. Admin. Code r. 482-1-137-.05

Current through Register Vol. 43, No. 1, October 31, 2024

Section 482-1-137-.05 - Definitions

The following definitions shall also apply in this chapter:

(a) ANNUITY. 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.

(b) CASH COMPENSATION. Any discount, concession, fee, service fee, commission, sales charge, loan, override, or cash benefit received by a producer in connection with the recommendation or sale of an annuity from an insurer, intermediary, or directly from the consumer.

(c) CONSUMER PROFILE INFORMATION. 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, all of the following:

1. Age.

2. Annual income.

3. Financial situation and needs, including debts and other obligations.

4. Financial experience.

5. Insurance needs.

6. Financial objectives.

7. Intended use of the annuity.

8. Financial time horizon.

9. Existing assets or financial products, including investment, annuity and insurance holdings.

10. Liquidity needs.

11. Liquid net worth.

12. Risk tolerance, including but not limited to, willingness to accept non-guaranteed elements in the annuity.

13. Financial resources used to fund the annuity.

14. Tax status.

(d) CONTINUING EDUCATION CREDIT OR CE CREDIT. One continuing education credit as defined in Alabama Insurance Regulation 110, Chapter 482-1-110.

(e) CONTINUING EDUCATION PROVIDER OR CE PROVIDER. An individual or entity that is approved to offer continuing education courses pursuant to Alabama Insurance Regulation 110, Chapter 482-1-110.

(f) FINRA. The Financial Industry Regulatory Authority or a successor agency.

(g) INSURER. A company required to be licensed under the laws of this state to provide insurance products, including annuities.

(f) INSURANCE PRODUCER. A person required to be licensed under the laws of this state to sell, solicit or negotiate insurance, including annuities.

(g) RECOMMENDATION. Advice provided by an insurance producer, or an insurer where no producer is involved, to an individual consumer that results in a purchase, exchange, or replacement of an annuity in accordance with that advice.

(h) INTERMEDIARY. 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 producers.

(i)

1. MATERIAL CONFLICT OF INTEREST. A financial interest of the producer in the sale of an annuity that a reasonable person would expect to influence the impartiality of a recommendation.

2. "Material conflict of interest" does not include cash compensation or non-cash compensation.

(j) NON-CASH COMPENSATION. Any form of compensation that is not cash compensation, including, but not limited to, health insurance, office rent, office support and retirement benefits.

(k) NON-QUARANTBED ELEMENTS. 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.

(l) PRODUCER. 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 regulation, "producer" includes an insurer where no producer is involved.

(m)

1. RECOMMENDATION. Advice provided by a producer 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.

2. "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.

(n) REPLACEMENT. A transaction in which a new policy or contract is to be purchased, and it is known or should be known to the proposing producer, or to the proposing insurer if there is no producer, that by reason of the transaction, an existing policy or contract has been or is to be any of the following:

1. Lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing insurer or otherwise terminated.

2. Converted to reduced paid-up insurance, continued an extended term insurance, or otherwise reduced in value by the use of nonforfeiture benefits or other policy values.

3. 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;

4. Reissued with any reduction in cash value.

5. Used in a financed purchase.

(o) SEC. The United States Securities and Exchange Commission.

Ala. Admin. Code r. 482-1-137-.05

New Rule: May 19, 2006; effective January 1, 2007. Filed with LRS May 22, 2006. Rule is not subject to the Alabama Administrative Procedure Act.

Amended by Alabama Administrative Monthly Volume XXXIV, Issue No. 10, July 29, 2016, eff. 1/1/2017.

Amended by Alabama Administrative Monthly Volume XXXIX, Issue No. 09, June 30, 2021, eff. 1/1/2022.

Author: Commissioner of Insurance

Statutory Authority:Code of Ala. 1975, §§ 27-2-17; 27-12-1, et seq.