(1) Definitions. In this section:
(a) "Annuity" means a fixed or variable annuity that is individually solicited, whether the product is classified as individual or group.
(b) "Recommendation" means advice provided by an insurance intermediary, or an insurer if no intermediary is involved, to an individual senior consumer that results in the purchase or exchange of an annuity in accordance with that advice.
(c) "Senior consumer" means a person who is 65 years of age or older. The term includes any joint owner of an annuity who is less than 65 years of age if at least one joint owner is 65 years of age or older, and any prospective joint purchaser of an annuity who is less than 65 years of age if at least one prospective joint purchaser is 65 years of age or older.
(2) Duties of insurers and insurance intermediaries with regard to recommendations.
(a) Except as provided in par. (c) , an insurance intermediary, or insurer if no intermediary is involved, may not recommend to a senior consumer the purchase or exchange of an annuity if the recommendation results in an insurance transaction or series of insurance transactions unless the intermediary or insurer has reasonable grounds to believe that the recommendation is suitable for the senior consumer on the basis of facts disclosed by the senior consumer as to his or her investments, other insurance products, and financial situation and needs.
(b) Before making a recommendation described in par. (a) , an insurance intermediary, or insurer if no intermediary is involved, shall make reasonable efforts to obtain information concerning all of the following:
1. The senior consumer's financial status.
2. The senior consumer's tax status.
3. The senior consumer's investment objectives.
4. Any other information that is reasonably appropriate for determining the suitability of a recommendation to the senior consumer.
(c) An insurance intermediary, or insurer if no intermediary is involved, has no obligation under par. (a) to a senior consumer related to a recommendation if the senior consumer does any of the following:
1. Refuses to provide relevant information requested by the insurer or insurance intermediary.
2. Fails to provide complete or accurate information.
3. Decides to enter into an insurance transaction that is not based on a recommendation of the insurer or insurance intermediary.
(d) Any recommendation of an insurer or insurance intermediary that, under par. (c) , is not subject to the obligation under par. (a) shall be reasonable under all circumstances actually known to the insurer or insurance intermediary at the time the recommendation is made.
(3) Insurer's supervisory responsibility.
(a) An insurer either shall ensure that a system to supervise recommendations that is reasonably designed to achieve compliance with this section is established and maintained by complying with pars. (c) to (e) , or shall establish and maintain such a system, which shall include at least all of the following:
1. Maintaining written procedures.
2. Conducting periodic reviews of its records that are reasonably designed to assist in detecting and preventing violations of this section.
(b) A general agent or independent agency either shall adopt a system established by an insurer to supervise recommendations of its insurance intermediaries that is reasonably designed to achieve compliance with this section, or shall establish and maintain such a system, which shall include at least all of the following:
1. Maintaining written procedures.
2. Conducting periodic reviews of records that are reasonably designed to assist in detecting and preventing violations of this section.
(c) An insurer may contract with a 3rd party, which may be a general agent or independent agency, to establish and maintain a system of supervision as required under par. (a) with respect to insurance intermediaries under contract with or employed by the 3rd party.
(d) An insurer shall make reasonable inquiry to ensure that any 3rd party with which the insurer contracts under par. (c) is performing the functions required under par. (a) 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 in all of the following ways:
1. The insurer annually obtains from a senior manager of the 3rd party who has responsibility for the delegated functions a representation that the 3rd party is performing the required functions and that the senior manager has a reasonable basis for making the representation.
2. The insurer, based on reasonable selection criteria, periodically selects 3rd parties contracting under par. (c) for reviews to determine whether the 3rd parties are performing the required functions. The insurer shall perform those procedures to conduct the reviews that are reasonable under the circumstances.
(e) An insurer that contracts with a 3rd party under par. (c) and that complies with the supervisory requirement under par. (d) satisfies its responsibilities under par. (a) as to insurance intermediaries under contract with or employed by the 3rd party.
(f) An insurer is not required under par. (a) , and a general agent or independent agency is not required under par. (b) , to do any of the following:
1. Review, or provide for the review of, all insurance intermediary solicited transactions.
2. Include in its system of supervision an insurance intermediary's recommendations made to senior consumers of products other than annuities offered by the insurer, general agent, or independent agency.
(g) A general agent or independent agency contracting with an insurer under par. (c) shall promptly, upon request by the insurer under par. (d) , provide a representation as described in par. (d) 1. or give a clear statement that it is unable to meet the representation criteria.
(h) No person may provide a representation under par. (d) 1. unless the person satisfies all of the following:
1. The person is a senior manager with responsibility for the delegated functions.
2. The person has a reasonable basis for making the representation.
(4) National Association of Securities Dealers Conduct Rules. Compliance with the National Association of Securities Dealers Conduct Rules pertaining to suitability satisfies the requirements under sub. (2) for the recommendation of variable annuities. Nothing in this subsection, however, limits the commissioner's ability to enforce this section.
(5) Remedial measures. The commissioner may do any of the following:
(a) Order an insurer to take reasonably appropriate corrective action for any senior consumer harmed by a violation of this section by the insurer or the insurer's insurance intermediary.
(b) Order an insurance intermediary to take reasonably appropriate corrective action for any senior consumer harmed by a violation of this section by the insurance intermediary.
(c) Order a general agent or independent agency that employs or contracts with an insurance intermediary to sell, or solicit the sale of, annuities to senior consumers to take reasonably appropriate corrective action for any senior consumer harmed by a violation of this section by the insurance intermediary.
(6) Penalties; mitigation.
(a) Any person who violates this section is subject to the penalties provided under s. 601.64 , suspension or revocation of a license or certificate of authority, and an order under s. 601.41 (4) .
(b) A penalty under par. (a) for a violation of sub. (2) (a) , (b) , or (d) , including a forfeiture, may be reduced or eliminated to the extent provided by rule of the commissioner if corrective action is taken for the senior consumer promptly after the violation is discovered.
(c) The commissioner may promulgate rules related to the reduction or elimination of penalties for violations of this section on the basis of prompt action taken to correct any harm caused to senior consumers by the violations.
(7) Record keeping. An insurer and an insurance intermediary, including a general agent and an independent agency, shall maintain, or be able to make available to the commissioner, records of the information collected from a senior consumer and other information used in making a recommendation that was the basis for an insurance transaction for 6 years after the insurance transaction is completed by the insurer, except as otherwise permitted by the commissioner by rule. An insurer may, but is not required to, maintain records on behalf of an insurance intermediary, including a general agent and an independent agency.
(8) Exemptions. This section does not apply to any of the following:
(a) Direct response solicitations in which no recommendation is made based on information collected from the senior consumer.
(b) Recommendations related to contracts used to fund any of the following:
1. An employee pension or welfare benefit plan that is covered by the federal Employee Retirement and Income Security Act.
2. A plan described in section 401 (a) or (k), 403 (b), or 408 (k) or (p) of the Internal Revenue Code, if the plan is established or maintained by an employer.
3. A government or church plan as defined in section 414 of the Internal Revenue Code, a government or church welfare benefit plan, or a deferred compensation plan of a state or local government or tax exempt organization under section 457 of the Internal Revenue Code.
4. A nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor.
5. A settlement or assumption of liability associated with personal injury litigation or any dispute or claim resolution process.
6. A formal prepaid funeral or burial contract.