2009 Hawaii Code
Volume 09
TITLE 24 - INSURANCE
CHAPTER 431 - INSURANCE CODE
§431:10D-623 - Duties of insurers and insurance producers.

     [§431:10D-623]  Duties of insurers and insurance producers.  (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 insurance producer, or the insurer where 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 about the consumer's investments, other insurance products, financial situation, and needs.

     (b)  Prior to the execution of a purchase or exchange of an annuity resulting from a recommendation, an insurance producer, or an insurer where no producer is involved, shall make reasonable efforts to obtain information concerning:

     (1)  The consumer's financial status;

     (2)  The consumer's tax status;

     (3)  The consumer's investment objectives; and

     (4)  Such other information used or considered to be reasonable by the insurance producer, or the insurer where no producer is involved, in making recommendations to the consumer.

  (c)(1)  Except as provided under paragraph (2), neither an insurance producer, nor an insurer where no producer is involved, shall have any obligation to a consumer related to any recommendation if a consumer:

         (A)  Refuses to provide relevant information requested by the insurer or insurance producer;

         (B)  Decides to enter into an insurance transaction that is not based on a recommendation of the insurer or insurance producer; or

         (C)  Fails to provide complete or accurate information.

     (2)  An insurer or insurance producer's recommendation subject to paragraph (1) shall be reasonable under all the circumstances actually known to the insurer or insurance producer at the time of the recommendation.

     (d)  An insurer shall either ensure that a system to supervise recommendations that is reasonably designed to achieve compliance with this part is established and maintained by complying with subsections (f), (g), and (h), or establish and maintain such a system, which shall include but not be limited to:

     (1)  Maintaining written procedures; and

     (2)  Conducting a periodic review of the insurer's records that is reasonably designed to assist in detecting and preventing violations of this part.

     (e)  A managing general agent and independent agency shall adopt a system established by an insurer to supervise recommendations of its insurance producers that is reasonably designed to achieve compliance with this part, or establish and maintain such a system, which shall include but not be limited to:

     (1)  Maintaining written procedures; and

     (2)  Conducting a periodic review of records that is reasonably designed to assist in detecting and preventing violations of this part.

     (f)  An insurer may contract with a third party, including a managing general agent or independent agency, to comply with the requirement of subsection (d) to establish and maintain a system of supervision of insurance producers under contract with or employed by the third party.

     (g)  An insurer shall make reasonable inquiry to ensure that the third party contracting under subsection (f) is performing the functions required under subsection (d) and shall take such action as is reasonable under the circumstances to enforce the contractual obligation to perform the functions.  An insurer may comply with its obligation to make reasonable inquiry by:

     (1)  Annually obtaining a certification from a third party senior manager who has responsibility for the delegated functions that the manager has a reasonable basis to represent, and does represent, that the third party is performing the required functions; provided that no person may provide a certification unless:

         (A)  The person is a senior manager with responsibility for the delegated functions; and

         (B)  The person has a reasonable basis for making the certification; and

     (2)  Based on reasonable selection criteria, periodically reviewing the performance of selected third parties contracting under subsection (f) to determine whether the third parties are performing the required functions.  The insurer shall perform those procedures to conduct the review that are reasonable under the circumstances.

     (h)  An insurer that contracts with a third party pursuant to subsection (f) and that complies with the requirements to supervise in subsection (g) shall have fulfilled its responsibilities under subsection (d).

     (i)  An insurer, managing general agent, or independent agency is not required by subsections (d) and (e) to:

     (1)  Review, or provide for review of, all insurance producer-solicited transactions; or

     (2)  Include in its system of supervision an insurance producer's recommendations to consumers of products other than the annuities offered by the insurer, managing general agent, or independent agency.

     (j)  A managing general agent or independent agency who contracts with an insurer under subsection (f) shall promptly, when requested by the insurer under subsection (g), give a certification as described in subsection (g) or give a clear statement that it is unable to satisfy the certification criteria.

     (k)  Compliance with the National Association of Securities Dealers Conduct Rules pertaining to suitability shall satisfy the requirements under this section for recommending variable annuities.  Nothing in this subsection shall limit the insurance commissioner's ability to enforce this part. [L 2007, c 257, pt of §2]