Suitability and Annuity Sales in CA

A.B. 689, which goes into effect on Jan. 1, 2012, mandates that California insurance agents verify that an annuity purchase is appropriate for a consumer based on age, income, financial objectives and other factors. Such suitability information shall be provided by the consumer. It further stipulates that an insurance producer must receive training from an insurance commission-approved entity before he or she can sell annuities.

Under the law, the producer must inform the consumer of any potential surrender period and surrender charge as well as any possible tax penalty if the buyer sells, exchanges, surrenders or starts taking an annuity income stream. 

“For far too long, seniors have been victimized by insurance agents who aggressively market and sell annuity products that are simply unsuitable for them,” said California’s insurance commissioner Dave Jones in a statement. “Many people unwittingly buy these products not realizing that their invested funds won’t be available to them or they’re terribly expensive to recover if they want to withdraw their money to pay for immediate expenses. It can be financially devastating to seniors on a fixed income.”