Olympia, Wash. — Gov. Chris Gregoire will sign a bill later today establishing suitability standards for the sale of annuities. The legislation (ESSB 5671), requested by Insurance Commissioner Mike Kreidler, requires insurers and agents selling fixed and variable annuities to confirm that the insurance product is suitable for the consumer.

Annuities are complex financial products. Consumers buying them as an investment rely on the seller and insurance company to explain the product’s surrender penalties, when money is provided, and the level of risk involved.

“Washington now joins 46 other states in placing the responsibility on the insurance industry to make sure an annuity sale is tailored to each buyer,” said Kreidler. “I thank Sen. Jean Berkey of Everett and Rep. Steve Kirby of Tacoma for their sponsorship of this important new consumer protection.”

Under the new law, insurance companies or their agents selling or replacing an annuity must make reasonable efforts to obtain a consumer’s:

Financial status
Tax status
Investment objectives, and
Other information considered reasonable when making a recommendation to the consumer.

Also, the insurer must establish and maintain a system to supervise its recommendations and 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 new law takes effect in July.

Web links

Fact sheet on the annuities bill

The annuities bill