Key Takeaways
- Indiana follows the NAIC Suitability in Annuity Transactions Model Regulation
- Producers must make reasonable efforts to determine suitability before recommending annuities
- Indiana requires disclosure of all material information about annuity products
- Replacement transactions require additional documentation and disclosure
- Annuity purchasers have a free look period to review and cancel
Indiana Annuity Regulations
Indiana regulates annuity sales to protect consumers from unsuitable products and ensure proper disclosure.
Suitability Requirements
Indiana adopted 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 |
Best Interest Standard
Indiana requires:
- Recommendations must be in the best interest of the consumer
- Compensation cannot be the primary motivator
- Material conflicts of interest must be disclosed
- Enhanced documentation is required
Free Look Period
Indiana provides a free look period for annuity contracts:
- Buyer can review the contract after delivery
- Can return for full premium refund within the free look period
- No penalty for exercising free look right
- Period begins when contract is delivered
Replacement Requirements
When replacing an existing annuity, producers must follow additional requirements:
Documentation Required
- Comparison statement - Side-by-side comparison of old and new contract
- Replacement form - Signed acknowledgment of replacement
- Suitability analysis - Why replacement is appropriate
- Surrender charge disclosure - Clear explanation of any surrender charges
Replacement Red Flags
IDOI scrutinizes replacements for:
- Short holding periods before replacement
- Surrender charges not fully explained
- New surrender charge period starting over
- Commission-motivated churning
Disclosure Requirements
Annuity disclosures must include:
| Disclosure | Requirement |
|---|---|
| Surrender Charges | Schedule and duration |
| Fees and Expenses | All charges explained |
| Guaranteed Values | Minimum guaranteed amounts |
| Death Benefit | How beneficiaries are paid |
| Tax Implications | Tax treatment explained |
Senior Protections
Indiana provides enhanced protections for senior annuity buyers:
- Additional suitability review for seniors
- Clear explanation of surrender periods
- Consideration of life expectancy vs. surrender period
- Enhanced disclosure of liquidity restrictions
Exam Tip: Remember that annuity suitability requires gathering comprehensive financial information before making any recommendation.
What must an Indiana producer do before recommending an annuity?
When replacing an existing annuity in Indiana, what must the producer provide?