Key Takeaways
- Ohio adopted the NAIC Suitability in Annuity Transactions Model Regulation effective 2020
- Producers must act in the best interest of the consumer when recommending annuities
- A comprehensive suitability analysis must be completed and documented before any annuity sale
- Insurers must establish supervision systems to ensure producer compliance with suitability requirements
- Ohio requires disclosure of all material conflicts of interest including compensation
Ohio Annuity Suitability Requirements
Ohio has adopted comprehensive annuity suitability regulations based on the NAIC model to protect consumers from unsuitable annuity sales.
Best Interest Standard
Ohio requires producers to act in the best interest of the consumer when making annuity recommendations:
Core Obligations
| Obligation | Requirement |
|---|---|
| Care | Exercise reasonable diligence, care, and skill |
| Disclosure | Provide material information to consumer |
| Conflict Management | Identify and avoid or disclose conflicts |
| Documentation | Maintain records of suitability analysis |
What "Best Interest" Means
The producer's recommendation must:
- Reflect the consumer's suitability information
- Be in the consumer's best interest
- Not place the producer's financial interest above the consumer's
- Be supported by documentation
Exam Tip: Ohio's best interest standard goes beyond basic suitability—producers cannot prioritize their own compensation over client needs.
Suitability Information Required
Before recommending an annuity, producers must gather:
Consumer Profile Categories
-
Financial Information
- Age and retirement status
- Annual income
- Financial situation and needs
- Tax status
-
Investment Profile
- Existing insurance and annuities
- Investment experience
- Investment objectives
- Investment time horizon
-
Risk Tolerance
- Liquidity needs
- Risk tolerance level
- Source of funds for purchase
-
Other Considerations
- Financial objectives
- Intended use of the annuity
- Any other relevant factors
Producer Duties
Reasonable Basis Requirement
Producers must have a reasonable basis to believe:
| Factor | Analysis Required |
|---|---|
| Consumer Benefit | Consumer will benefit from annuity features |
| Product Match | Annuity matches stated objectives, time horizon |
| Alternative Comparison | Other products were considered |
| Surrender Charges | Consumer can afford surrender period |
Comparison to Existing Coverage
When replacing an existing annuity, producers must:
- Compare benefits of existing vs. new annuity
- Consider surrender charges on existing contract
- Evaluate any new surrender charge period
- Determine if benefits justify the costs
Prohibited Practices
Producers must NOT:
- Recommend annuities primarily for compensation
- Dissuade consumers from truthful responses
- Make misleading claims about annuity features
- Fail to disclose material conflicts
Insurer Supervision Requirements
Ohio requires insurers to:
Supervision Systems
| Requirement | Description |
|---|---|
| Written Procedures | Establish supervision system |
| Training | Train producers on suitability requirements |
| Review | Review annuity transactions for compliance |
| Correction | Take corrective action when needed |
Safe Harbor
Insurers have a safe harbor if they:
- Establish and maintain supervision procedures
- No knowledge that recommendations were unsuitable
- Conduct regular compliance reviews
- Take appropriate corrective action
Under Ohio annuity suitability rules, what standard must producers meet when recommending annuities?
Before recommending an annuity in Ohio, a producer must gather all of the following EXCEPT:
What must Ohio insurers establish to comply with annuity suitability requirements?
When replacing an existing annuity in Ohio, what must a producer evaluate?
A producer recommends an annuity primarily because it pays the highest commission. This practice is: