Md. Code Regs. 31.09.12.05

Current through Register Vol. 51, No. 22, November 1, 2024

Section 31.09.12.05 - Supervision System

A. Except as permitted under Regulation .04I of this chapter, an insurer may not issue an annuity recommended to a consumer unless there is a reasonable basis to believe the annuity would effectively address the particular consumer's financial situation, insurance needs, and financial objectives based on the consumer's consumer profile information.

B. An insurer shall establish and maintain a supervision system that is reasonably designed to achieve the insurer's and its producers' compliance with this regulation, including, but not limited to, the following:

(1) The insurer shall establish and maintain reasonable procedures to inform its producers of the requirements of this regulation and shall incorporate the requirements of this regulation into relevant producer training manuals;

(2) The insurer shall establish and maintain standards for producer product training and shall establish and maintain reasonable procedures to require its producers to comply with the requirements of Regulation .08 of this chapter;

(3) The insurer shall provide product-specific training and training materials which explain all material features of its annuity products to its producers;

(4) The insurer shall establish and maintain procedures for the review of each recommendation prior to issuance of an annuity that are designed to ensure there is a reasonable basis to determine that the recommended annuity would effectively address the particular consumer's financial situation, insurance needs, and financial objectives. Such review procedures may:

(a) Apply a screening system for the purpose of identifying selected transactions for additional review; and

(b) Be accomplished electronically or through other means including, but not limited to, physical review. An electronic or other system may be designed to require additional review only of those transactions identified for additional review by the selection criteria;

(5) The insurer shall establish and maintain reasonable procedures to detect recommendations that are not in compliance with Regulations .04, .06, and .07 of this chapter. An insurer may comply with this section by applying sampling procedures or by confirming the consumer profile information or other required information under this section after issuance or delivery of the annuity. The procedures described in this section may include, but are not limited to:

(a) Confirmation of the consumer's profile information;

(b) Systematic consumer surveys;

(c) Producer and consumer interviews;

(d) Confirmation letters;

(e) Producer statements or attestations; or

(f) Programs of internal monitoring;

(6) The insurer shall establish and maintain reasonable procedures to assess, prior to or upon issuance or delivery of an annuity, whether a producer has provided to the consumer the information required to be provided under this Regulation .04 of this chapter;

(7) The insurer shall establish and maintain reasonable procedures to identify and address suspicious consumer refusals to provide consumer profile information;

(8) The insurer shall establish and maintain reasonable procedures to identify and eliminate any sales contests, sales quotas, bonuses, and non-cash compensation that are based on the sales of specific annuities within a limited period of time;

(9) The requirements of §B(8) of this regulation are not intended to prohibit the receipt of health insurance, office rent, office support, retirement benefits, or other employee benefits by employees if those benefits are not based upon the volume of sales of a specific annuity within a limited period of time; and

(10) On an annual basis, the insurer shall provide a written report to senior management, including to the senior manager responsible for audit functions, that details a review, with appropriate testing, reasonably designed to determine the effectiveness of the supervision system, the exceptions found, and corrective action taken or recommended, if any.

C. Nothing in this regulation restricts an insurer from contracting for performance of a function, including maintenance of procedures, required under this regulation.

D. An insurer is responsible for taking appropriate corrective action and may be subject to sanctions and penalties pursuant to Regulation .09 of this chapter, regardless of whether the insurer contracts for performance of a function and regardless of the insurer's compliance with this section. An insurer's supervision system under this regulation shall include supervision of contractual performance under this regulation, including, but not limited to:

(1) Monitoring and, as appropriate, conducting audits to assure that the contracted function is properly performed; and

(2) Annually obtaining a certification from a senior manager who has responsibility for the contracted function that the manager has a reasonable basis to represent, and does represent, that the function is properly performed.

E. An insurer is not required to include in its system of supervision:

(1) A producer's recommendations to consumers of products other than the annuities offered by the insurer; or

(2) Consideration of or comparison to options available to the producer or compensation relating to those options other than annuities or other products offered by the insurer.

Md. Code Regs. 31.09.12.05

Regulation .05 amended effective 49:8 Md. 501, eff. 4/18/2022