Tim Beauregard
Regional VP-South

Three years after the National Association of Insurance Commissioners (NAIC) amended the Suitability in Annuity Transactions Model Regulation setting standards and procedures requiring agents and insurers to act in the best interest of a client when making an annuity recommendation there still seems to be confusion among agents and reps. Most states have adopted the provisions of Model #275 into their suitability requirements with more states set to go into effect in January of 2024. This piece will help you to be familiar with the Model and its requirements.

To satisfy the Best Interest obligation under Model # 275 an agent must satisfy these four obligations:

  1. Care
  2. Disclosure
  3. Conflict
  4. Documentation


When making a recommendation agents must be diligent using care and skill to:

  1. Know the client’s financial situation, needs and objectives.
  2. Agents must also make reasonable efforts to obtain consumer profile information. Meaning if your client refuses to answer suitability questions the app will be denied.
  3. Understand other options available to the client at time of recommendation.
  4. Have a reasonable basis to believe the recommendation addresses the client’s financial situation, needs and objectives over the life of the product.
  5. Communicate the basis of the recommendation to the client.


Prior to making a recommendation or sale of an annuity, agents must:

  1. Disclose in writing the scope and terms of the relationship with the client and their role in the transaction.
  2. Disclose the products which you can sell.
  3. Disclose the type of compensation received, how you are paid. If the client asks you must disclose the amount or percentage paid.


Agents must identify and avoid or reasonably manage and disclose material conflicts of interest including any additional compensation programs paid by the IMO or carrier.


At the time of the sale, make a written record of any recommendation and the basis of the recommendation. You will want to note the process of your recommendation including the product considered, why and how the annuity meets the client’s financial needs and objectives.

More importantly, and where we see the most surprise and push back from agents, is that Insurers are required to establish and maintain a system to supervise recommendations that a client’s insurance needs and financial objectives are properly addressed at the time of sale.  This means there are more phone calls to clients, more verification of replacement information with the client and previous carrier, and more required forms. In the end it is the insurance company who is responsible for compliance with the state insurance department suitability requirements. If the carrier does not believe there is reasonable basis for believing the annuity is in the client’s best interest the application will be declined.

The annuity department at Wholehan Marketing has over 25 years of experience assisting agents and reps with suitability in annuity recommendations. We have a good idea which sales and replacements will or will not get through carrier suitability and what to watch out for. We also work with our carrier contacts to prescreen suitability prior to application submission. Give us a call with your next case to avoid any potential declines.