(a) 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 producer, or an insurer if 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 their investments and other insurance products and as to their financial situation and needs, including the consumerâs suitability information, and that there is a reasonable basis to believe all of the following: (1) The consumer has been reasonably informed of various features of the annuity, such as the potential surrender period and surrender charge, potential tax penalty if the consumer sells, exchanges, surrenders, or annuitizes the annuity, mortality and expense fees, investment advisory fees, potential charges for and features of riders, limitations on interest returns, insurance and investment components, and market risk. (2) The consumer would receive a tangible net benefit from the transaction. (3) The particular annuity as a whole, the underlying subaccounts to which funds are allocated at the time of purchase or exchange of the annuity, and riders and similar product enhancements, if any, are suitable, and in the case of an exchange or replacement, the transaction as a whole is suitable, for the particular consumer based on their suitability information. (4) In the case of an exchange or replacement of an annuity, the exchange or replacement is suitable, including taking into consideration all of the following: (A) Whether 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. (B) Whether the consumer would benefit from product enhancements and improvements. (C) Whether the consumer has had another annuity exchange or replacement and, in particular, an exchange or replacement within the preceding 60 months. (b) Prior to the execution of a purchase, exchange, or replacement of an annuity resulting from a recommendation, a producer, or an insurer where no producer is involved, shall make reasonable efforts to obtain the consumerâs suitability information. (c) Except as permitted under subdivision (d), an insurer shall not issue an annuity recommended to a consumer unless there is a reasonable basis to believe the annuity is suitable based on the consumerâs suitability information. The preceding sentence and subdivision (d) notwithstanding, neither a producer nor an insurer shall in any event recommend to a person 65 years of age or older the sale of an annuity to replace an existing annuity that requires the insured to pay a surrender charge for the annuity that is being replaced, where purchase of the annuity does not confer a substantial financial benefit over the life of the policy to the consumer, so that a reasonable person would believe the purchase is unnecessary. (d) (1) Except as provided under paragraph (2), neither a producer nor an insurer shall have any obligation to a consumer under subdivision (a) or (c) related to an annuity transaction if any of the following occur: (A) No recommendation is made. (B) A recommendation was made and was later found to have been prepared based on materially inaccurate information provided by the consumer. (C) A consumer refuses to provide relevant suitability information and the annuity transaction is not recommended. (D) A consumer decides to enter into an annuity transaction that is not based on a recommendation of the insurer or the producer. (2) An insurerâs issuance of an annuity subject to paragraph (1) shall be reasonable under all the circumstances which are actually known, or which after reasonable inquiry should be known, to the insurer or
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