2.2 New Hampshire Annuity Regulations
Key Takeaways
- New Hampshire has adopted the NAIC best-interest (suitability) standard for annuity recommendations under Ins 306.
- Producers owe four obligations before recommending an annuity: care, disclosure, conflict-of-interest, and documentation.
- RSA 408:19 sets the general contract requirements for annuities, including nonforfeiture and disclosure.
- New Hampshire individual annuities carry a 10-day free look (right to examine) for a full refund.
- Surrender charges, the surrender schedule, and any penalty-free withdrawal corridor must be disclosed in writing before sale.
The Best-Interest (Suitability) Standard
New Hampshire has adopted the NAIC Suitability in Annuity Transactions Model Regulation, updated in 2020 to a best-interest standard, through Administrative Rule Ins 306; the underlying contract requirements live in RSA 408:19 (General Contract Requirements for Annuities). A producer recommending or selling an annuity must act in the consumer's best interest at the time of the recommendation, without placing the producer's or insurer's financial interest ahead of the consumer's.
The best-interest standard breaks into four obligations — memorize them as the backbone of the section:
| Obligation | What the producer must do |
|---|---|
| Care | Know the consumer profile, understand the product, and have a reasonable basis that the recommendation suits the consumer's needs and objectives. |
| Disclosure | Disclose role, scope, products offered, and how the producer is compensated (cash and non-cash). |
| Conflict of interest | Identify and avoid or reasonably manage conflicts; sales contests based on a single product are barred. |
| Documentation | Make and retain a written record of the recommendation and the basis for it. |
The Consumer Profile
Before recommending, the producer must make reasonable efforts to obtain the consumer's profile information. Missing data does not excuse the duty — if the consumer refuses, the producer documents the refusal and may proceed only on what is known.
| Profile category | Examples |
|---|---|
| Financial situation | Income, liquid net worth, assets, debts |
| Insurance / financial objectives | Goals, intended use of the annuity |
| Time horizon | When funds are needed |
| Risk tolerance | Willingness/ability to bear loss |
| Tax status | Bracket; qualified vs. non-qualified money |
| Liquidity needs | Anticipated need to access funds |
| Existing holdings | Current annuities, life insurance, investments |
Free Look on Annuities
A New Hampshire individual annuity carries a 10-day free look (right to examine). The owner may return the contract within 10 days of delivery and receive a full refund of premium (for variable annuities, typically account value plus deducted charges). The period begins when the contract is delivered, so producers should document delivery.
Senior-Specific Protections
The best-interest rule applies to every consumer, but New Hampshire — like the NAIC model — expects heightened care for older buyers, where surrender charges and long surrender periods can be most harmful. In practice the producer must:
- Walk the senior through the surrender-charge schedule and how long it lasts;
- Compare any existing contract being replaced and quantify lost benefits or new charges;
- Confirm the annuity matches the senior's liquidity and time horizon (a 10-year surrender schedule rarely suits an 80-year-old needing access to funds);
- Provide written confirmation of the suitability/best-interest analysis.
Exam trap: There is no separate "senior annuity license" in New Hampshire. The protection is the same best-interest standard applied with extra scrutiny — distractors implying a special senior-only statute are wrong.
Surrender Charges and Free-Withdrawal Corridor
Deferred annuities impose surrender charges (a back-end load) if the owner withdraws more than the contract allows during the surrender period. New Hampshire requires the producer to disclose, in writing, before sale:
| Disclosure item | Detail required |
|---|---|
| Surrender charge | That a charge applies and the percentage |
| Surrender schedule | The declining percentages by contract year |
| Penalty-free withdrawal | Any free-withdrawal corridor (commonly up to 10% of value per year) |
| Market value adjustment | Whether an MVA applies on early surrender |
Worked example: A consumer buys a deferred annuity with a 7-year surrender schedule of 7%, 6%, 5%, 4%, 3%, 2%, 1% and a 10% annual free-withdrawal corridor. In year 2 she withdraws $20,000 from a $100,000 contract. The first $10,000 (10% corridor) is penalty-free; the remaining $10,000 is hit with the 6% year-2 charge = $600 surrender charge (plus any MVA and possible IRS 10% early-distribution penalty if under 59½).
RSA 408:19 Contract Requirements
RSA 408:19 and the standard nonforfeiture law require annuity contracts to spell out how values are determined: the guaranteed interest rate, the nonforfeiture (minimum guaranteed) values, mortality and expense charges, and the settlement options. A contract that fails to meet the standard nonforfeiture floor cannot be approved for sale in the state.
New Hampshire also requires producers to deliver the NAIC Buyer's Guide to Annuities and an annuity disclosure document at or before application, summarizing the contract's features, fees, and guarantees in plain language. For variable annuities, which are securities, the producer must additionally hold a FINRA registration and provide the prospectus — variable products layer federal securities regulation on top of New Hampshire insurance law.
Product Types the Standard Covers
The best-interest analysis applies across the annuity spectrum, and the exam expects you to match product mechanics to suitability:
| Annuity type | Value driver | Suitability flag |
|---|---|---|
| Fixed deferred | Insurer-declared rate, guaranteed minimum | Lowest risk; surrender period vs. liquidity |
| Indexed (FIA) | Credited via an index with caps/participation rates | Complexity, long surrender schedules, caps |
| Variable | Subaccount performance (market risk) | Market loss, requires securities license |
| Immediate (SPIA) | Annuitized stream now | Loss of liquidity; irrevocable |
Replacement Within an Annuity Sale
When an annuity recommendation replaces an existing annuity, the producer's best-interest analysis must specifically weigh the whole transaction: surrender charges incurred on the old contract, a new surrender period beginning, lost benefits or riders, and any tax consequences. A 1035 exchange can defer tax, but it does not erase a new surrender schedule — restarting a 7-year surrender on a senior is a classic unsuitable-replacement red flag, tying this section directly to Section 2.3.
Common Exam Traps
- The standard is best interest (post-2020), not merely "suitability" — both terms appear, but the four obligations (care, disclosure, conflict-of-interest, documentation) are the testable structure.
- A consumer's refusal to give profile information does not let the producer skip the analysis — it must be documented.
- The free look (10 days) refunds premium; surrender charges apply only after the free look and outside any free-withdrawal corridor.
- Sales contests tied to a single product violate the conflict-of-interest obligation.
Under New Hampshire's best-interest annuity rule, which set of obligations must a producer satisfy when recommending an annuity?
A consumer declines to share her income and net worth before buying a deferred annuity. What is the New Hampshire producer's correct course of action?
A New Hampshire annuity owner withdraws $20,000 from a $100,000 contract in year 2. The contract has a 10% annual penalty-free corridor and a year-2 surrender charge of 6%. What surrender charge applies?