The national Annuities guide explains how annuities work: accumulation and annuitization, fixed, indexed and variable contracts, payout options, surrender charges and taxation. This guide covers Maine's rules for selling them. The main one is the best interest standard in Bureau Rule 917, plus the replacement rule, licensing limits and guaranty coverage.

Best interest standard (Rule 917)

When a producer recommends an annuity, the producer must act in the consumer's best interest at the time of the recommendation. The producer may not put his or her own financial interest, or the insurer's, ahead of the consumer's (Rule 917, sec. 6(1)).

The standard has four parts:

What the care obligation does not do:

• It does not create a fiduciary duty.
• It does not require recommending the annuity with the lowest compensation.
• It does not impose an ongoing duty to monitor the contract.

Insurer supervision and records

• Insurers must run a supervision system that reviews recommendations.
• Insurers must eliminate sales contests, quotas, bonuses and non-cash compensation tied to selling specific annuities within a limited period (Rule 917, sec. 6(3)).
• Insurers, agencies and producers keep records for 3 years after the transaction is completed (Rule 917, sec. 9).

Producer training

• Before selling annuities, a producer completes a one-time 4-credit-hour annuity training course approved by the Bureau (Rule 917, sec. 7).
• A holder of Maine's apprentice producer license may not sell annuities (24-A M.R.S. 1420-Q(7)).
• Selling variable annuities requires the life license plus the securities licensing needed to sell variable contracts (1410(8)).

Replacement (Rule 919)

Maine's replacement rule covers both life insurance and annuities.

• The applicant and producer sign a statement on whether the applicant has existing policies or contracts.
• The producer presents and reads the replacement notice no later than when the application is taken, unless the applicant declines the reading.
• The replacing insurer must give the buyer 30 days from delivery to return the new contract for an unconditional full refund.
• A financed purchase uses money from a withdrawal, surrender or loan on an existing policy to pay for the new one. Rule 919 treats a financed purchase as a replacement.
• Telling an applicant to answer "no" to avoid the replacement notice violates the twisting statute (24-A M.R.S. 2155). Penalties can include license suspension or revocation and forfeiture of the commission.
• Insurers keep replacement documents for 5 years after the new contract ends.

Disclosure rules that don't apply to annuities

• Maine's life cost disclosure rule (Rule 240, the Buyer's Guide and Policy Summary) exempts annuities.
• The life illustration rule (Rule 910) also excludes annuities.
• Annuity sales are governed by Rule 917 and Rule 919 instead.

Guaranty protection

The Maine Life and Health Insurance Guaranty Association covers up to $250,000 in annuity present value, including cash surrender and withdrawal values (24-A M.R.S. 4603). No one may use the association's existence to sell (4620).

Common exam traps

• Best interest has four parts: care, disclosure, conflict of interest and documentation. It is not a fiduciary duty.
• 4-hour one-time annuity training before selling.
• Replacement: 30-day right to return for a full refund. The producer reads the notice at or before the application.
• Look back 60 months for prior exchanges or replacements.
• Records: 3 years under Rule 917; 5 years for replacement files under Rule 919.
• Guaranty limit for annuities: $250,000.