Volume 3, No. 7 - August 2014

Compliance Corner

This section has been created to assist you in keeping your insurance business in compliance. The items are intended as reminders only and are not necessarily the exact text of the Florida Statutes or Florida Administrative Code. The legal cites have been provided for your further reference.

New Law for the Surrendering of Life Insurance and Annuity Contracts

House Bill 633 created section 627.4553, Florida Statutes, which was effective July 1, 2014. This statute addresses the surrender of life insurance and annuity contracts when the proceeds from the transaction are not being used to obtain a new life insurance or annuity contract.

This statute requires two things to be done:

  1. The owner of a life insurance policy or annuity being surrendered must be provided with certain information about the contract that is being surrendered. The information to be provided includes at least the following information:
    • The amount of any surrender charge,
    • If the consumer lost any minimum interest rate guarantees,
    • The amount of any tax consequence resulting from the transaction,
    • The amount of any death benefits lost, and
    • If the consumer lost any other investment performance guarantees.

    It is our understanding that any company providing the information listed above to the owner of a contract being surrendered will be in compliance with the new statute, at this time.

  2. The Department of Financial Services is to create and adopt a rule that clarifies what is required to be provided to the consumer. The Department will be creating a rule as required that will clarify the information that is to be provided. The rule may only clarify the requirements imposed by the statute to help people to understand the statute. The rule may not set new terms or conditions to be met. The rulemaking process does take some time to complete, so the rule may not be adopted until later this year, possibly in the fall. The statute does not require the Department to create a form to be used for these surrenders. The form is one that each company will provide, although it must include the information required by the rule that is adopted. We believe many companies may already be performing this service to their customers on forms or letter formats that they have created on their own.

The exact wording of the new statute is:

627.4553 Recommendations to surrender: If an insurance agent recommends the surrender of an annuity or life insurance policy containing a cash value and does not recommend that the proceeds from the surrender be used to fund or purchase another annuity or life insurance policy, before execution of the surrender, the insurance agent, or insurance company if no agent is involved, shall provide, on a form that satisfies the requirements of the rule adopted by the department, information relating to the annuity or policy to be surrendered. Such information shall include, but is not limited to, the amount of any surrender charge, the loss of any minimum interest rate guarantees, the amount of any tax consequences resulting from the transaction, the amount of any forfeited death benefit, and the value of any other investment performance guarantees being forfeited as a result of the transaction. This section also applies to a person performing insurance agent activities pursuant to an exemption from licensure under this part.

We will keep you updated on the progress of the rule as it is written and proceeds through the rulemaking process. You can also monitor our "Industry Alerts" on our division's homepage at www.MyFloridaCFO.com/Division/Agents.

[See Chapter 2014-123, Laws of Florida and section 627.4453, Florida Statutes]

Agencies and Their Members' Appointment Requirements

If a sole proprietorship, partnership, corporation, or association holds an agency contract, all members thereof who solicit, negotiate, or effect insurance contracts, and all officers and stockholders of the corporation who solicit, negotiate, or effect insurance contracts, must qualify and be licensed individually as agents or customer representatives, and all of such agents must be individually appointed as to each property and casualty insurer entering into an agency contract with such agency. Each appointing insurer must comply with this and must determine and require that each agent so associated with such agency is likewise appointed as to the same such insurer and for the same type and class of license. However, an insurer is not required to comply with these provisions for an agent within an agency who does not solicit, negotiate, or effect insurance contracts for that insurer.

All bail bond agents who are members of the same agency, partnership, corporation, or association must be appointed to represent the same surety companies. If any member of such agency, partnership, corporation, or association is licensed and appointed as a professional bail bond agent, all members thereof must be licensed and appointed as one also. While it is the responsibility of each insurer to require that each bail bond agent in an agency is appointed to represent that particular insurer, Rule 69B-241.100(41), F.A.C., states that the license of the primary bail bond agent for the bail bond agency may be suspended until all the agents in the agency are in compliance. When necessary, a bail bond agent can send a letter to the Department requesting termination of any of their appointments with an insurer/surety company.

The ability for a licensee to make a request to the Department to terminate an appointment applies to all license types as has always been the case.

[See sections 626.733 and 648.55, Florida Statutes, and Rule 69B-241.100(41), Florida Administrative Code]

Bail Bonds Agents: Reporting Contact Information Changes

Every bail bond agent must notify the Department, insurer, managing general agent, and the clerk of each court in which the licensee is registered within 10 working days after a change in the licensee's principal business address or telephone number. The licensee must also notify the Department within 10 working days after a change of the name, address, or telephone number of each agency or firm for which he or she writes bonds and any change in the licensee's name, home address, e-mail address, or telephone number. This can be easily accomplished through the licensee's MyProfile account. Otherwise, you may submit form DFS-H2-1564 to the Department.

The owner or operator of a bail bond agency must designate a primary bail bond agent for each location, and must file with the Department the name and license number of the person and the address of the location on a form approved by the Department. Failure to notify the department within 10 working days after such change is grounds for disciplinary action. This can be easily accomplished by submitting form DFS-H2-1541 to the Department. This form should not be used to report a change in a licensee's demographic information.

[See sections 648.387 and 648.421, Florida Statutes]

New Website with Compliance Information

We recently launched a new section on our website dedicated to compliance information. The new section also provides consumers and licensees with an overview of the investigative process and many functions performed by our Bureau of Investigation. We encourage you to visit this new section to our website and come back often as we update and add more information to it. You can visit the new compliance site at www.MyFloridaCFO.com/Division/Agents/Compliance.