SECTION 365:25-17-7. Duties of insurers and of insurance producers

(a)   Suitability required. In recommending to a consumer the purchase of an annuity or the exchange of an annuity that results in another insurance transaction or series of insurance transactions, the insurance producer, or the insurer where no producer is involved, shall have reasonable grounds for believing that the recommendation is suitable for the consumer on the basis of the facts disclosed by the consumer as to his or her investments and other insurance products and as to his or her financial situation and needs.

(b)   Producer required to obtain information from consumer. Prior to the execution of a purchase or exchange of an annuity resulting from a recommendation, an insurance producer, or an insurer where no producer is involved, shall make reasonable efforts to obtain information concerning:

(1)   The consumer's financial status;

(2)   The consumer's tax status;

(3)   The consumer's investment objectives; and

(4)   Such other information used or considered to be reasonable by the insurance producer, or the insurer where no producer is involved, in making recommendations to the consumer.

(c)   Obligation to consumer.

(1)   Except as provided under Paragraph (2) of this subsection, neither an insurance producer, nor an insurer where no producer is involved, shall have any obligation to a consumer under Subsection A related to any recommendation if a consumer:

(A)   Refuses to provide relevant information requested by the insurer or insurance producer;

(B)   Decides to enter into an insurance transaction that is not based on a recommendation of the insurer or insurance producer; or

(C)   Fails to provide complete or accurate information.

(2)   An insurer or insurance producer's recommendation subject to Paragraph (1) shall be reasonable under all the circumstances actually known to the insurer or insurance producer at the time of the recommendation.

(d)   System to supervise recommendations of insurance producers.

(1)   An insurer either shall assure that a system to supervise recommendations that is reasonably designed to achieve compliance with this regulation is established and maintained by complying with Paragraphs (3) to (5) of this subsection, or shall establish and maintain such a system, including, but not limited to:

(A)   Maintaining written procedures; and

(B)   Conducting periodic reviews of its records that are reasonably designed to assist in detecting and preventing violations of this regulation.

(2)   A general agent and independent agency either shall adopt a system established by an insurer to supervise recommendations of its insurance producers that is reasonably designed to achieve compliance with this regulation, or shall establish and maintain such a system, including, but not limited to:

(A)   Maintaining written procedures; and

(B)   Conducting periodic reviews of records that are reasonably designed to assist in detecting and preventing violations of this regulation.

(3)   An insurer may contract with a third party, including a general agent or independent agency, to establish and maintain a system of supervision as required by Paragraph (1) with respect to insurance producers under contract with or employed by the third party.

(4)   An insurer shall make reasonable inquiry to assure that the third party contracting under Paragraph (3) of this subsection is performing the functions required under Paragraph (1) of this subsection and shall take such action as is reasonable under the circumstances to enforce the contractual obligation to perform the functions. An insurer may comply with its obligation to make reasonable inquiry by doing all of the following:

(A)   The insurer annually obtains a certification from a third party senior manager who has responsibility for the delegated functions that the manager has a reasonable basis to represent, and does represent, that the third party is performing the required functions; and

(B)   The insurer, based on reasonable selection criteria, periodically selects third parties contracting under Paragraph (3) of this subsection for a review to determine whether the third parties are performing the required functions. The insurer shall perform those procedures to conduct the review that are reasonable under the circumstances.

(5)   An insurer that contracts with a third party pursuant to Paragraph (3) of this subsection and that complies with the requirements to supervise in Paragraph (4) of this subsection shall have fulfilled its responsibilities under Paragraph (1) of this subsection.

(6)   An insurer, general agent or independent agency is not required by Paragraph (1) or (2) of this subsection to:

(A)   Review, or provide for review of, all insurance producer solicited transactions; or

(B)   Include in its system of supervision an insurance producer's recommendations to consumers of products other than the annuities offered by the insurer, general agent or independent agency.

(7)   A general agent or independent agency contracting with an insurer pursuant to Paragraph (3) of this subsection shall promptly, when requested by the insurer pursuant to Paragraph (4) of this subsection, give a certification as described in Paragraph (4) of this subsection or give a clear statement that it is unable to meet the certification criteria.

(8)   No person may provide a certification under Paragraph (4)(A) of this subsection unless:

(A)   The person is a senior manager with responsibility for the delegated functions; and

(B)   The person has a reasonable basis for making the certification.

(e)   NASD and suitability of variable annuities. Compliance with the National Association of Securities Dealers Conduct Rules pertaining to suitability shall satisfy the requirements under this section for the recommendation of variable annuities. However, nothing in this subsection shall limit the Insurance Commissioner's ability to enforce the provisions of this regulation.

[Source: Added at 22 Ok Reg 1429, eff 5-4-05 (emergency); Added at 23 Ok Reg 2738, eff 7-14-06]