The Care Obligation requires four acts, exercised with reasonable diligence, care, and skill, as follows:

1. Know the consumer’s financial situation, insurance needs, and financial objectives;

2. Understand the available recommendation options after making a reasonable inquiry into available options;

3. Have a reasonable basis to believe the recommended option effectively addresses the consumer’s financial situation, insurance needs, and financial objectives over the life of the product, as evaluated in light of the consumer profile information; and

4. Communicate the basis or bases of the recommendation.

The Care Obligation contains 10 additional provisions explaining what is, and what is not, required to satisfy these four acts. In general, the producer must consider the totality of the consumer's information — which the producer has made reasonable efforts to obtain — against the totality of the products available to be sold by the producer, and must conclude that the annuity effectively addresses the consumer’s financial situation, insurance needs, and financial objectives, and that the consumer would benefit from certain features of the annuity.

Items of Note:

• The importance of the factors relevant in determining whether an annuity effectively addresses a consumer's financial situation may vary based on the facts and circumstances of a particular case.

• The recommendation does not have to be the annuity with the lowest one-time or multiple occurrence compensation structure.

The Disclosure Obligation sets forth three disclosure requirements:

1. Prior to any recommendation, an "Insurance Agent (Producer) Disclosure for Annuities" form setting forth:

   • The scope and terms of the producer's relationship with the consumer and the producer's role in the transaction.

   • The products the producer is licensed and authorized to sell.

   • The insurers for whom the producer may sell products.

   • The sources and types of cash and non-cash compensation to be received by the producer and from whom the producer will receive the compensation.

   • Notice of the consumer's right to request more information on the cash compensation to be received.

2. If requested by the consumer or the consumer's designated representative, a reasonable estimate of the cash compensation to be received and whether the compensation amount is a one-time or multiple occurrence amount.

3. Prior to or at the time of the recommendation, disclosure of the various features of the annuity.

Items of Note:

• The Insurance Agent (Producer) Disclosure must be provided at the outset of the relationship so the consumer can decide whether to provide his or her information.

• To ensure the consumer receives the disclosure, the signature page should not appear on a separate page.

The Conflict of Interest Obligation requires a producer to:

1. identify, and

2. either:

   1. avoid, or

   2. reasonably manage and disclose

material conflicts of interest, including material conflicts of interest related to an ownership interest.

In addition, as part of the Best Interest Obligation, in making a recommendation, a producer must act without placing the producer’s or the insurer’s financial interest ahead of the consumer’s interest.

Items of Note:

• "Material conflict of interest" means a financial interest of the producer in the sale of an annuity that a reasonable person would expect to influence the impartiality of a recommendation, but does not include cash compensation or non-cash compensation.

• Insurers are required to eliminate sales contests, sales quotas, and bonuses that are based on the sales of specific annuities within a limited period of time.

The Documentation Obligation varies, as follows:

• If a recommendation was made – the producer must make a written record of any recommendation and the basis for the recommendation.

• If the consumer refused to provide some or all of the consumer's information – a signed "Consumer Refusal to Provide Information" form at the time of the sale.

• If the consumer purchased an annuity that was not recommended – a signed "Consumer Decision to Purchase an Annuity NOT Based on a Recommendation" form at the time of the sale.

Items of Note:

• Even if a transaction is not based on a recommendation, an insurer's issuance of the annuity must be reasonable under all circumstances actually known to the insurer at the time the annuity is issued.

• Insurers must establish and maintain reasonable procedures to identify and address suspicious consumer refusals to provide consumer profile information.