§ 58-60-170. Duties of insurers and insurance producers. - North Carolina Statutes

§ 58‑60‑170. Duties of insurers and insurance producers.

(a)        In recommending toa consumer the purchase of an annuity or the exchange of an annuity thatresults in another insurance transaction or series of insurance transactions,the insurance producer, or the insurer where no producer is involved, shallhave reasonable grounds for believing that the recommendation is suitable forthe consumer on the basis of the facts disclosed by the consumer as to theconsumer's investments and other insurance products and as to the consumer'sfinancial situation and needs.

(b)        Before recommendingthe purchase or exchange of an annuity resulting from a recommendation, theinsurance producer, or the insurer where no producer is involved, shall makereasonable efforts to obtain information about the particular consumer'scircumstances, including, but not limited to, all of the following:

(1)        The consumer'sfinancial status.

(2)        The consumer's taxstatus.

(3)        The consumer'sinvestment objectives.

(4)        Any otherinformation used or considered to be reasonable by the insurance producer, orthe insurer where no producer is involved, in making recommendations to theconsumer.

(c)        Except as providedunder subdivision (1) of this subsection, neither an insurance producer, nor aninsurer where no producer is involved, shall have any obligation to a consumerunder subsection (a) of this section related to any recommendation if aconsumer does any of the following:

(1)        Refuses to providerelevant information requested by the insurer or insurance producer. An insureror insurance producer's recommendation subject to this subdivision shall bereasonable under all the circumstances actually known to the insurer orinsurance producer at the time of the recommendation.

(2)        Decides to enter intoan insurance transaction that is not based on a recommendation of the insureror insurance producer.

(3)        Fails to providecomplete or accurate information requested by the insurer or insuranceproducer.

(d)        An insurer eithershall assure that a system to supervise recommendations that is reasonablydesigned to achieve compliance with this Part is established and maintained bycomplying with subsections (e), (f), and (g) of this section, or shallestablish and maintain such a system, including:

(1)        Maintaining writtenprocedures.

(2)        Conducting periodicreviews of its records that are reasonably designed to assist in detecting andpreventing violations of this Part.

(e)        A general agent andindependent agency either shall adopt a system established by an insurer tosupervise recommendations of its insurance producers that is reasonablydesigned to achieve compliance with this Part, or shall establish and maintainsuch a system, including:

(1)        Maintaining writtenprocedures.

(2)        Conducting periodicreviews of records that are reasonably designed to assist in detecting andpreventing violations of this Part.

(f)         An insurer maycontract with a third party, including a general agent or independent agency,to establish and maintain a system of supervision as required by subsection (d)of this section with respect to insurance producers under contract with, oremployed by, the third party. An insurer shall make reasonable inquiry toassure that the third‑party contracting under this subsection isperforming the functions required under subsection (d) of this section andshall take any action that is reasonable under the circumstances to enforce thecontractual obligation to perform the functions. An insurer may comply with itsobligation to make reasonable inquiry by doing all of the following:

(1)        The insurer annuallyobtains a certification from a third‑party senior manager who hasresponsibility for the delegated functions that the manager has a reasonablebasis to represent, and does represent, that the third party is performing therequired functions. No person may provide a certification under thissubdivision unless (i) the person is a senior manager with responsibility forthe delegated functions; and (ii) the person has a reasonable basis for makingthe certification.

(2)        The insurer, basedon reasonable selection criteria, periodically selects third partiescontracting under this subsection for a review to determine whether the thirdparties are performing the required functions. The insurer shall perform thoseprocedures to conduct the review that are reasonable under the circumstances.

An insurer that contracts witha third party, and that complies with the requirements to supervise the thirdparty pursuant to this subsection, shall have fulfilled its responsibilitiesunder subsection (d) of this section.

A general agent or independentagency contracting with an insurer shall promptly, when requested by theinsurer pursuant to this subsection, give a certification as described in thissubsection or give a clear statement that it is unable to meet thecertification criteria.

(g)        An insurer, generalagent, or independent agency is not required by subsections (d) or (e) of thissection to:

(1)        Review, or providefor review of, all insurance producer solicited transactions; or

(2)        Include in itssystem of supervision an insurance producer's recommendations to consumers ofproducts other than the annuities offered by the insurer, general agent, orindependent agency.

(h)        Compliance with theFinancial Industry Regulatory Authority Conduct Rules pertaining to suitabilityshall satisfy the requirements under this section for the recommendation ofannuities subject to the Conduct Rules. Nothing in this subsection limits theCommissioner's ability to enforce the provisions of this Article.  (2007‑298, s. 1.1;2009‑382, s. 36.)