On March 30, 2009, Washington Governor Chris Gregoire signed into law Senate Bill 5671, An Act Relating to the Suitability of Annuities Sold in Washington (the “Act”). The Act applies to insurers and insurance producers who sell fixed and valuable annuities in the State of Washington, and its purpose is to ensure that the annuity product to be sold is suitable and tailored for each individual consumer.
The Act now charges insurance companies or producers either selling or replacing an annuity contract to have reasonable grounds for recommending an annuity product and to make reasonable efforts to obtain the following information from consumers: financial and tax status, investment objectives and other information prior to issuing recommended annuities. Also, the insurer must establish and maintain a system to supervise recommendations by it and its producers and ensure compliance with the Act. Insurers and producers must keep records of any information collected and used as the basis for the recommendations for five years after the sale or for five years after the annuity begins paying benefits, whichever is longer.
The Act does not apply to certain annuities including those issued pursuant to direct solicitations where no recommendations are made and certain employer, retirement and benefit plans.
The new law takes effect in July 2009.
