The idea: before recommending an annuity, know the client the way a doctor reads a chart before prescribing.
Two rule sets, depending on the date:
Recommendations made before January 1, 2025: the suitability article (§10509.910 to §10509.919). The agent must have reasonable grounds to believe the annuity is suitable, based on 14 items of suitability information (§10509.913(i)): age; annual income; financial situation and needs, including the resources used to fund the annuity; financial experience; financial objectives; intended use of the annuity; financial time horizon; existing assets, including investment and life insurance holdings; liquidity needs; liquid net worth; risk tolerance; tax status; whether the consumer has a reverse mortgage; and whether the consumer intends to apply for means-tested government benefits such as Medi-Cal or veterans' aid and attendance. This is the list the 2026 exam outline cites.
Recommendations on or after January 1, 2025: the best interest article (§10509.9200 to §10509.9210, SB 263). The agent must act in the consumer's best interest without putting the agent's or insurer's financial interest first, meeting care, disclosure, conflict of interest and documentation obligations. The consumer profile adds insurance needs, debts and obligations, the willingness to accept nonguaranteed elements, and other relevant information.
Under both: the consumer must be reasonably informed of surrender periods and charges, tax penalties, fees and riders, and should receive a tangible net benefit; replacements weigh new surrender periods and lost benefits. Exceptions include direct-response sales with no recommendation, employer plans such as ERISA, 401(k) and 403(b) plans, structured settlements and formal prepaid funeral contracts (§10509.912, §10509.9202). Records must be kept for 5 years after the transaction (§10509.917, §10509.9207). Insurers must deliver the NAIC annuity buyer's guide with or before delivery of the annuity (§10509.9209). Violations are penalized under §10509.9 (for an agent, at least $1,000 for a first violation and $5,000 to $50,000 for repeat or knowing violations).