5 Steps to Annuity Suitability

  • Originally published February 16, 2011 , last updated May 27, 2016

Simply put, suitability considers whether an annuity fits a customer’s unique situation, and it’s one area many states are watching closer than ever.

Over the last several years, many states have begun to specifically define what agents must consider when selling annuities — especially to seniors. Most regulations haven’t changed, but states are interpreting them more carefully and monitoring sales more closely.

Know Your Customer

Agents need more information about customers so they can determine which product is the best fit. In the past, establishing a client’s net worth and income may have been enough. Today, an agent should also learn where that income comes from, the customer’s tax status and financial objectives, and his risk tolerance and cash flow needs for at least five years.

Aviva makes this easier by providing a Customer Identification and Suitability Confirmation Worksheet to submit with each annuity application. Completing it can help you gather all the information you need.

Suitability Review

Monitoring is the second new suitability requirement, and it’s Aviva’s responsibility. Aviva’s New Business group reviews all applications for completeness and problems, such as inconsistent information, minimal net worth or lack of liquidity.

Then, the Suitability Review Team randomly evaluates about 40% of annuity policy applications for suitability. It also reviews every application for customers age 75 and above and every application for internal replacements.

5 Steps to Suitability

1. Understand the Products — Explain them fully. Be especially thorough with seniors.

2. Recommend Carefully — Aviva offers many different products with different features. Find the right match for your customer.

3. Document Discussions Make and keep notes about conversations with customers. For replacement sales, be sure to clearly identify why the current product isn’t a fit and how your recommended product will better meet the customer’s needs.

4. Don’t Hesitate to Walk — A customer might already own the right insurance product or you may not offer one that fits.

5. Complete the Questionnaire — Suitability questionnaires that are incomplete or unclear might be delayed while the carrier gathers additional information and evaluates suitability.

For answers to your suitability questions, call one of our Annuity Marketing department at 1-877-645-4939.