September 24, 2008, Introduced by Reps. Constan, Polidori, Clack, Vagnozzi, Meisner, Robert Jones, Lahti, Clemente, Shaffer, Ball, Condino and Bieda and referred to the Committee on Insurance.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending sections 4151, 4153, and 4155 (MCL 500.4151, 500.4153,
and 500.4155), as added by 2006 PA 399, and by adding sections
4156, 4158, and 4159; and to repeal acts and parts of acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 4151. As used in this chapter:
(a) "Annuity" means a fixed annuity or variable annuity that
is individually solicited, whether the product is classified as an
individual or group annuity.
(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.
(c) "Recommendation" means advice provided by an insurance
producer , or by an insurer where no producer is involved , to an
individual
consumer. that results in a purchase or exchange of an
annuity
in accordance with that advice.
Sec. 4153. (1) This chapter applies to any recommendation to
purchase or exchange an annuity made to a consumer by an insurance
producer , or by an insurer where no producer is involved. ,
that
results
in the purchase or exchange recommended.
(2) This chapter does not apply to any recommendation to
purchase or exchange an annuity involving any of the following:
(a) Direct response solicitations where 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 and 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 government 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.
Sec. 4155. (1) 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.
(2) Prior to a recommendation under subsection (1) and 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
all of the following information:
(a) The consumer's financial status.
(b) The consumer's tax status.
(c) The consumer's investment objectives, goals, and needs.
(d) The ability of the consumer to pay for an annuity without
liquidating assets.
(e) (d)
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.
(3) Except as provided under subsection (4), neither an
insurance producer, nor an insurer where no producer is involved,
shall have any obligation to a consumer under subsection (1)
related to any recommendation if a consumer does any of the
following:
(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.
(c) Fails to provide complete or accurate information.
(4) An insurer or insurance producer's recommendation subject
to subsection (1) shall be reasonable under all the circumstances
actually known to the insurer or insurance producer at the time of
the recommendation.
Sec. 4156. 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 provide to the consumer a copy of the buyer's guide prepared
under section 4158 and a disclosure document. The disclosure
document shall be in plain English and shall contain all of the
following:
(a) The generic name of the contract, the company product
name, if different, and form number, and the fact that it is an
annuity.
(b) The insurer's name and address.
(c) A description of the contract and its benefits,
emphasizing its long-term nature, including examples where
appropriate of all of the following:
(i) The guaranteed, nonguaranteed, and determinable elements of
the contract, and their limitations, if any, and an explanation of
how they operate.
(ii) An explanation of the initial crediting rate, specifying
any bonus or introductory portion, the duration of the rate, and
the fact that rates may change from time to time and are not
guaranteed.
(iii) Periodic income options both on a guaranteed and
nonguaranteed basis.
(iv) Any value reductions caused by withdrawals from or
surrender of the contract.
(v) How values in the contract can be accessed.
(vi) The death benefit, if available, and how it will be
calculated.
(vii) A summary of the federal tax status of the contract and
any penalties applicable on withdrawal of values from the contract.
(viii) Impact of any rider, such as a long-term care rider.
(d) Specific dollar amount or percentage charges and fees with
an explanation of how they apply.
(e) Information about the current guaranteed rate for new
contracts that contains a clear notice that the rate is subject to
change.
Sec. 4158. The commissioner shall prepare and, beginning
January 1, 2009 and annually thereafter, shall publish a consumer
guide to annuities as provided in this section. The consumer guide
to annuities shall be written in plain English and shall contain an
explanation of all of the following:
(a) What an annuity is.
(b) The different kinds of annuities.
(c) How interest rates are set.
(d) Charges that may be subtracted from an annuity.
(e) Tax treatment of annuities.
(f) How to determine whether an annuity is a right choice.
Sec. 4159. In addition to any right to revoke an annuity, a
consumer has the right to cancel an annuity within 30 days after
its delivery and to have the entire premium refunded if, after
examination of the annuity, the consumer is not satisfied for any
reason. An annuity shall have a notice prominently printed in not
less than 14-point type on the first page of the policy and on the
summary of coverage and the consumer shall also be provided a
separate notice in not less than 14-point type entitled "right to
cancel". The notices shall state in plain English that the consumer
has the right to return the annuity within 30 days after its
delivery and to have the entire premium refunded if, after
examination of the policy, the applicant is not satisfied for any
reason and shall contain an address where a notice of cancellation
can be sent. The consumer shall acknowledge in writing the receipt
of the separate right to cancel notice. Cancellation occurs when
the consumer mails a written notice of cancellation or sends a
telegram to the address stated in the notice of cancellation.
Enacting section 1. Section 4165 of the insurance code of
1956, 1956 PA 218, MCL 500.4165, is repealed.