Bill Text: MI HB6112 | 2019-2020 | 100th Legislature | Introduced
Bill Title: Insurance: other; suitability in annuity transaction model act; create. Amends secs. 4151 & 4153 of 1956 PA 218 (MCL 500.4151 & 500.4153). TIE BAR WITH: HB 6113'20, HB 6114'20, HB 6115'20
Spectrum: Moderate Partisan Bill (Republican 5-1)
Status: (Introduced - Dead) 2020-12-02 - Referred To Second Reading [HB6112 Detail]
Download: Michigan-2019-HB6112-Introduced.html
HOUSE BILL NO. 6112
August 17, 2020, Introduced by Reps. Brenda
Carter, Rendon, Berman, Markkanen, Wozniak and Paquette and referred to the
Committee on Insurance.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending sections 4151 and 4153 (MCL 500.4151 and 500.4153), as amended by 2012 PA 544.
the people of the state of michigan enact:
Sec. 4151. As used in this chapter:
(a) "Annuity"
means an annuity that is an insurance product under state law that is
individually solicited, whether the product is classified as an individual or
group annuity.
(b)
"Cash compensation" means any discount, concession, fee, service fee,
commission, sales charge, loan, override, or cash benefit received by a
producer in connection with the recommendation or sale of an annuity from an
insurer or intermediary, or directly from the consumer.
(c)
"Consumer profile information" means information that is reasonably appropriate
to determine whether a recommendation addresses the consumer's financial
situation, insurance needs, and financial objectives, including, at a minimum,
the following:
(i) Age.
(ii) Annual income.
(iii) Financial situation and needs,
including debts and other obligations.
(iv) Financial experience.
(v) Insurance needs.
(vi) Financial objectives.
(vii) Intended use of the annuity.
(viii) Financial time horizon.
(ix) Existing assets or financial
products, including investment, annuity, and insurance holdings.
(x) Liquidity needs.
(xi) Liquid net worth.
(xii) Risk tolerance, including, but not
limited to, willingness to accept nonguaranteed elements in the annuity.
(xiii) Financial resources used to fund the
annuity.
(xiv) Tax status.
(d)
(b) "Insurance producer" or "producer"
means insurance producer as defined in section 1201 and includes a business
entity described in section 1205(2) that is licensed as an insurance producer
under this act. Insurance producer or producer
includes an insurer if no producer is involved.
(e)
"Intermediary" means an entity contracted directly with an insurer or
with another entity contracted with an insurer to facilitate the sale of the
insurer's annuities by producers.
(f)
"Material conflict of interest" means a financial interest of the
producer in the sale of an annuity that a reasonable person would expect to
influence the impartiality of a recommendation. Material conflict of interest
does not include cash compensation or noncash compensation.
(g)
"Noncash compensation" means a form of compensation that is not cash
compensation, including, but not limited to, health insurance, office rent,
office support, and retirement benefits.
(h)
"Nonguaranteed elements" means the premiums, credited interest rates,
including any bonus, benefits, values, dividends, noninterest based credits,
charges, or elements of formulas used to determine any of these, that are
subject to company discretion and are not guaranteed at issue. An element is
considered nonguaranteed if any of the underlying nonguaranteed elements are
used in its calculation.
(i)
(c) "Recommendation" means advice provided by an insurance producer, or an
insurer if no producer is involved, a producer to an individual consumer that results was intended to result or does result in
a purchase, exchange, or replacement of an annuity in accordance with that
advice. Recommendation does not include
general communication to the public, generalized customer services assistance
or administrative support, general educational information and tools,
prospectuses, or other product and sales material.
(j)
(d) "Replacement" or "replace" means a
transaction in which a new policy or
contract annuity is
to be purchased, and it is known or should be known to the proposing producer,
or to the proposing insurer if there is no whether or not a producer is involved, that by reason of the
transaction, an existing annuity or other
insurance policy or contract has
been or is to be 1 any of the following:
(i) Lapsed, forfeited, surrendered or partially surrendered,
assigned to the replacing insurer, or otherwise terminated.
(ii) Converted to
reduced paid-up insurance, continued as extended term insurance, or otherwise
reduced in value by the use of nonforfeiture benefits or other policy values.
(iii) Amended so as to
effect either a reduction in benefits or in the term for which coverage would
otherwise remain in force or for which benefits would be paid.
(iv) Reissued with any
reduction in cash value.
(v) Used in a
financed purchase.
(e) "Suitability information" means information
that is reasonably appropriate to determine the suitability of a
recommendation, including all of the following:
(i) Age.
(ii) Annual income.
(iii) Financial situation and needs, including
the financial resources used for the funding of the annuity.
(iv) Financial experience.
(v) Financial objectives.
(vi) Intended use of the annuity.
(vii) Financial time horizon.
(viii) Existing
assets, including investment and life insurance holdings.
(ix) Liquidity needs.
(x) Liquid net worth.
(xi) Risk tolerance.
(xii) Tax status.
Sec. 4153. (1) This chapter applies to any sale or recommendation to purchase, exchange, or replace of an annuity. made to a
consumer by an insurance producer, or by an insurer if no producer is involved,
that results in the purchase, exchange, or replacement recommended.
(2) This Except as otherwise provided in this chapter, this chapter
does not apply to any recommendation to purchase, exchange, or replace an
annuity involving any of the following:
(a) Direct response
solicitations if there is no recommendation based on information collected from
the consumer.
(b) Contracts used to
fund any of the following:
(i) An employee pension or welfare benefit plan that is covered
by the employee retirement income security act of 1974, Public Law 93-406.
(ii) A plan described
by 26 USC 401(a), 26 USC 401(k), 26 USC 403(b), 26 USC 408(k), or 26 USC
408(p), if established or maintained by an employer.
(iii) A governmental or
church plan defined in 26 USC 414, a government or church welfare benefit plan,
or a deferred compensation plan of a state or local government or tax exempt
organization under 26 USC 457.
(iv) A nonqualified
deferred compensation arrangement established or maintained by an employer or
plan sponsor.
(v) Settlements of or
assumptions of liabilities associated with personal injury litigation or any
dispute or claim resolution process.
(vi) Formal prepaid
funeral contracts.
(3) This chapter does not require a producer to obtain any
license other than a producer license with the appropriate line of authority to
sell, solicit, or negotiate insurance in this state, including, but not limited
to, any securities license, to fulfill the duties and obligations contained
under this chapter if the producer does not give advice or provide services
that are otherwise subject to securities laws or engage in any other activity
requiring other professional licenses.
(4) This chapter does not create or imply a private cause of
action for a violation of this chapter or subject a producer to civil liability
under the standard of care outlined in section 4155 or under standards
governing the conduct of a fiduciary or a fiduciary relationship.
Enacting section 1. This amendatory act takes effect 6
months after the date it is enacted into law.
Enacting section
2. This amendatory act does not take effect unless all of the following bills
of the 100th legislature are enacted into law:
(a) Senate Bill
No.____ or House Bill No. 6113 (request no. 07415'20).
(b) Senate Bill
No.____ or House Bill No. 6114 (request no. 07416'20).
(c) Senate Bill
No.____ or House Bill No. 6115 (request no. 07417'20).
