Key Takeaways
- Kansas follows the NAIC Suitability in Annuity Transactions Model Regulation
- Producers must determine suitability before recommending annuities
- Kansas requires disclosure of all material information about annuity products
- Replacement transactions require additional documentation and disclosure
- Senior protections require special consideration for annuity sales
Kansas Annuity Regulations
Kansas regulates annuity sales to protect consumers from unsuitable products and ensure proper disclosure under K.A.R. 40-2-12 and related regulations.
Suitability Requirements
Kansas has 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
Kansas 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
Kansas 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 K.A.R. 40-2-12 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
KID 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
Kansas 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 a Kansas producer do before recommending an annuity?
What Kansas regulation governs policy replacement requirements?