Key Takeaways
- New Mexico requires suitability analysis before recommending annuity products
- Annuity contracts must include a free look period for consumer review
- New Mexico follows NAIC Suitability in Annuity Transactions Model Regulation
- Replacement transactions require detailed disclosure and comparison
- Senior-specific protections apply to annuity sales to older consumers
New Mexico Annuity Regulations
New Mexico has adopted comprehensive annuity regulations to protect consumers from unsuitable sales and deceptive practices.
Suitability Requirements
New Mexico follows the NAIC Suitability in Annuity Transactions Model Regulation:
Producer Duties
Before recommending an annuity, the producer must:
- Make reasonable efforts to obtain customer information
- Analyze whether the recommendation is suitable
- Document the basis for the recommendation
- Disclose all material information about the product
Required Information
| Category | Information Required |
|---|---|
| Financial Status | Income, liquid assets, financial needs |
| Tax Status | Tax bracket, qualified vs. non-qualified funds |
| Investment Objectives | Goals, time horizon, risk tolerance |
| Existing Coverage | Current annuities and life insurance |
| Liquidity Needs | Expected need for funds |
Free Look Period
New Mexico provides a free look period for annuity contracts:
- Buyer can return for full premium refund
- No penalty for exercising free look
- Period begins when contract is delivered
Senior-Specific Protections
New Mexico has protections for annuity sales to seniors:
Enhanced Disclosures
Seniors must receive:
- Clear explanation of surrender charges
- Comparison with existing contracts
- Written confirmation of suitability
- Information about withdrawal restrictions
Annuity Suitability - Best Interest Standard
As of 2021, New Mexico adopted the NAIC Suitability in Annuity Transactions Model Regulation which includes a best interest standard:
Producer Obligations
| Obligation | Requirement |
|---|---|
| Care | Exercise reasonable diligence, care, and skill |
| Disclosure | Disclose role, compensation, and material conflicts |
| Conflict of Interest | Identify and avoid/mitigate conflicts |
| Documentation | Document basis for recommendation |
Four-Step Suitability Process
- Know Your Customer: Gather comprehensive financial information
- Know Your Product: Understand all product features and limitations
- Match Product to Customer: Ensure recommendation is suitable
- Document Everything: Maintain records for at least 5 years
Supervision Requirements
Insurance companies must:
- Establish and maintain supervision system
- Train producers on suitability requirements
- Review recommendations for compliance
- Take corrective action when violations occur
Important: The best interest standard requires producers to act in the customer's best interest, not just recommend suitable products.
Annuity Free Look Period
| Policy Type | Free Look Period |
|---|---|
| Standard Annuity | 10 days |
| Annuity Replacement | 10 days minimum |
| Senior (65+) Annuity | Consider extended period |
What must a New Mexico producer do before recommending an annuity?