(a) The producer, in making a recommendation, shall exercise reasonable diligence, care, and skill to:

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Terms Used In Hawaii Revised Statutes 431:10D-627

  • Annuity: A periodic (usually annual) payment of a fixed sum of money for either the life of the recipient or for a fixed number of years. A series of payments under a contract from an insurance company, a trust company, or an individual. Annuity payments are made at regular intervals over a period of more than one full year.
  • Fiduciary: A trustee, executor, or administrator.
  • Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
(1) Know the consumer’s financial situation, insurance needs, and financial objectives;
(2) Understand the available recommendation options after making a reasonable inquiry into options available to the producer;
(3) Have a reasonable basis to believe the recommended option effectively addresses the consumer’s financial situation, insurance needs, and financial objectives over the life of the product, as evaluated in light of the consumer profile information; and
(4) Communicate the basis or bases of the recommendation.
(b) To fulfill the obligation under subsection (a), a producer shall:

(1) Make reasonable efforts to obtain consumer profile information from the consumer prior to the recommendation of an annuity;
(2) Consider the types of products the producer is authorized and licensed to recommend or sell that address the consumer’s financial situation, insurance needs, and financial objectives; provided that this paragraph shall not require analysis or consideration of any products outside the authority and license of the producer or other possible alternative products or strategies available in the market at the time of the recommendation. Producers shall be held to standards applicable to producers with similar authority and licensure; and
(3) Have a reasonable basis to believe that the consumer would benefit from certain features of the annuity, such as annuitization, death, or living benefit, or other insurance-related features.
(c) This section shall not be construed to create a fiduciary obligation or relationship and shall only create a regulatory obligation as established in this part.
(d) The consumer profile information, characteristics of the insurer, and product costs, rates, benefits, and features shall be those factors generally relevant in making a determination whether an annuity effectively addresses the consumer’s financial situation, insurance needs, and financial objectives; provided that the level of importance of each factor may vary depending on the facts and circumstances of a particular case; provided further that each factor shall not be considered in isolation.
(e) A producer’s obligation under subsection (a):

(1) Shall apply to the particular annuity as a whole and the underlying subaccounts to which funds are allocated at the time of purchase or exchange of an annuity, and riders and similar producer enhancements, if any;
(2) Shall not be construed to mean the annuity with the lowest one-time or multiple occurrence compensation structure shall necessarily be recommended; and
(3) Shall not be construed to mean the producer has ongoing monitoring obligations under this section; provided that an obligation may be separately owed under the terms of a fiduciary, consulting, investment advising, or financial planning agreement between the consumer and the producer.
(f) In the case of an exchange or replacement of an annuity, the producer shall consider the whole transaction, including taking into consideration whether:

(1) The consumer will incur a surrender charge; be subject to the commencement of a new surrender period; lose existing benefits, such as death, living, or other contractual benefits; or be subject to increased fees, investment advisory fees, or charges for riders and similar product enhancements;
(2) The replacing product would substantially benefit the consumer in comparison to the replaced product over the life of the product; and
(3) The consumer has had another annuity exchange or replacement and, in particular, an exchange or replacement within the preceding sixty months.
(g) Nothing in this part shall be construed to 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 in this part; provided that the producer shall not give advice or provide services that are otherwise subject to securities laws or engage in any other activity requiring other professional licenses.

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