Sec. 1115.051. SUITABILITY OF ANNUITY PRODUCT REQUIRED. (a) In recommending to a consumer the purchase of an annuity or the exchange of an annuity that results in another insurance transaction or series of insurance transactions, the agent, or the insurer if an agent is not involved, must have a reasonable basis to believe that:

(1) the recommendation is suitable for the consumer on the basis of the facts disclosed by the consumer as to the consumer's investments and other insurance products and as to the consumer's financial situation and needs, including the consumer's suitability information;

(2) the consumer has been reasonably informed of various features of the annuity, such as the potential surrender period and the surrender charge, any potential tax penalty if the consumer sells, exchanges, surrenders, or annuitizes the annuity, mortality and expense fees, investment advisory fees, potential charges for and features of riders, limitations on interest returns, insurance and investment components, and market risk;

(3) the consumer would benefit from certain features of the annuity, such as tax-deferred growth, annuitization, or a death or living benefit;

(4) the particular annuity as a whole, the underlying subaccounts to which funds are allocated at the time of the purchase or exchange of the annuity, and any riders or similar product enhancements are suitable, and, in the case of an exchange or replacement, the transaction as a whole is suitable, for the particular consumer based on the consumer's suitability information; and

(5) in the case of an exchange or replacement of an annuity, the exchange or replacement is suitable, including taking into consideration whether the consumer:

(A) 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 or similar product enhancements;

(B) would benefit from product enhancements and improvements; and

(C) has had another annuity exchange or replacement, and in particular, an exchange or replacement in the preceding 36 months.

(b) Before the execution of a purchase, exchange, or replacement of an annuity resulting from a recommendation, an agent, or an insurer if an agent is not involved, shall make reasonable efforts to obtain the consumer's suitability information.

(c) Except as permitted by Subsection (d), an insurer may not issue an annuity recommended to a consumer unless the insurer has a reasonable basis to believe the annuity is suitable based on the consumer's suitability information.

(d) Subject to Subsection (e), an agent or insurer does not have any obligation to a consumer related to an annuity transaction if:

(1) the consumer refuses to provide suitability information requested by the agent or insurer;

(2) the agent or insurer does not make a recommendation;

(3) the agent or insurer makes a recommendation later found to have been prepared based on inaccurate material information provided by the consumer; or

(4) the consumer decides to enter into a transaction that is not based on a recommendation of the agent or insurer.

(e) An insurer's issuance of an annuity under circumstances described by Subsection (d) must be reasonable under all circumstances actually known to the insurer at the time the annuity is issued.

(f) An agent, or an insurer if an agent is not involved, shall at the time of sale of an annuity:

(1) make a record of any recommendation made by the agent or insurer that is subject to Subsection (a);

(2) obtain a customer-signed statement documenting the customer's refusal, if any, to provide suitability information; and

(3) obtain a customer-signed statement acknowledging that an annuity transaction is not recommended if the customer decides to enter into an annuity transaction that is not based on the agent's or insurer's recommendation.

Added by Acts 2007, 80th Leg., R.S., Ch. 736 (H.B. 2761), Sec. 1, eff. September 1, 2007.

Amended by:

Acts 2011, 82nd Leg., R.S., Ch. 1156 (H.B. 2277), Sec. 9, eff. September 1, 2011.