Fiscal Note — 1120 HB, Annuity Transactions (Office of Insurance Commissioner)
Summary
Individual state agency fiscal note for 1120 HB, Annuity transactions, from 160-Office of Insurance Commissioner. Part II states that Section 2(3) requires a producer, when making a recommendation of an annuity, to act in the best interest of the consumer under the circumstances known at the time the recommendation is made. It states that Section 2(5)(a) prohibits an insurer, except as permitted under Subsection (4), from issuing an annuity recommended to a consumer unless there is a reasonable basis to believe the annuity would effectively address the consumer’s financial situation, insurance needs, and financial objectives. Part V states that Section 2(12) authorizes the Office of Insurance Commissioner to adopt rules.
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“Fiscal Note — 1120 HB, Annuity Transactions (Office of Insurance Commissioner).”
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Individual State Agency Fiscal Note
Bill Number: 1120 HB Title: Annuity transactions Agency: 160-Office of Insurance
Commissioner
Part I: Estimates
No Fiscal Impact
Estimated Cash Receipts to:
NONE
Estimated Operating Expenditures from:
FY 2024 FY 2025 2023-25 2025-27 2027-29
FTE Staff Years 0.3 0.1 0.2 0.1 0.1
Account
Insurance Commissioners Regulatory 48,908 13,939 62,847 27,878 27,878
Account-State 138-1
Total $ 48,908 13,939 62,847 27,878 27,878
Estimated Capital Budget Impact:
NONE
The cash receipts and expenditure estimates on this page represent the most likely fiscal impact. Factors impacting the precision of these estimates,
and alternate ranges (if appropriate), are explained in Part II.
Check applicable boxes and follow corresponding instructions:
If fiscal impact is greater than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete entire fiscal note
form Parts I-V.
X If fiscal impact is less than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete this page only (Part I).
Capital budget impact, complete Part IV.
X Requires new rule making, complete Part V.
Legislative Contact: Megan Mulvihill Phone: 360-786-7304 Date: 01/09/2023
Agency Preparation: Michael Walker Phone: 360-725-7036 Date: 01/12/2023
Agency Approval: Michael Wood Phone: 360-725-7007 Date: 01/12/2023
OFM Review: Jason Brown Phone: (360) 742-7277 Date: 01/13/2023
Form FN (Rev 1/00) 177,680.00 Request # 23-09-1
FNS063 Individual State Agency Fiscal Note 1 Bill # 1120 HB
Part II: Narrative Explanation
II. A - Brief Description Of What The Measure Does That Has Fiscal Impact
Significant provisions of the bill and any related workload or policy assumptions that have revenue or expenditure impact on the responding agency by
section number.
Section 2(3) requires a producer, when making a recommendation of an annuity, to act in the best interest of the consumer
under the circumstances known at the time the recommendation is made, without placing the producer’s or the insurer’s
financial interest ahead of the consumer’s interest. A producer has acted in the best interest of the consumer if they have
satisfied the obligations regarding care, disclosure, conflict of interest and documentation.
Section 2(5)(a) prohibits an insurer, except as permitted under Subsection (4), from issuing an annuity recommended to a
consumer unless there is a reasonable basis to believe the annuity would effectively address the particular consumer’s
financial situation, insurance needs, and financial objectives based on the consumer’s consumer profile information.
Section 2(5)(b) requires an insurer to establish and maintain a supervision system that is reasonably designed to achieve the
insurer’s and the producer’s compliance with Section 2.
Section 2(7) puts the responsibility for compliance with Section 2 directly on the insurer. If a violation occurs, either
because of the action or inaction of the insurer, or its producer, the Office of Insurance Commissioner (OIC) may order a)
an insurer to take reasonably appropriate corrective action for any consumer harmed by a failure by the insurer, an entity
contracted to perform the insurer’s supervisory duties, or by the producer; b) a general agency, independent agency or the
producer to take reasonably appropriate corrective action for any consumer harmed by the producer’s violation; and/or c)
appropriate penalties and sanctions.
Section 2(12) authorizes the OIC to adopt rules necessary to implement and administer Section 2.
II. B - Cash receipts Impact
Cash receipts impact of the legislation on the responding agency with the cash receipts provisions identified by section number and when appropriate, the
detail of the revenue sources. Description of the factual basis of the assumptions and the method by which the cash receipts impact is derived. Explanation
of how workload assumptions translate into estimates. Distinguished between one time and ongoing functions.
II. C - Expenditures
Agency expenditures necessary to implement this legislation (or savings resulting from this legislation), with the provisions of the legislation that result in
the expenditures (or savings) identified by section number. Description of the factual basis of the assumptions and the method by which the expenditure
impact is derived. Explanation of how workload assumptions translate into cost estimates. Distinguished between one time and ongoing functions.
Section 2(3) requires a producer, when making a recommendation of an annuity, to act in the best interest of the consumer
under the circumstances known at the time the recommendation is made, without placing the producer’s or the insurer’s
financial interest ahead of the consumer’s interest. A producer has acted in the best interest of the consumer if they have
satisfied the obligations regarding care, disclosure, conflict of interest and documentation.
Section 2(5)(a) prohibits an insurer, except as permitted under Subsection (3), from issuing an annuity recommended to a
consumer unless there is a reasonable basis to believe the annuity would effectively address the particular consumer’s
financial situation, insurance needs, and financial objectives based on the consumer’s consumer profile information.
Section 2(5)(b) requires an insurer to establish and maintain a supervision system that is reasonably designed to achieve the
insurer’s and the producer’s compliance with Section 2.
Section 2(7) puts the responsibility for compliance with Section 2 directly on the insurer. If a violation occurs, either
because of the action or inaction of the insurer, or its producer, the Office of Insurance Commissioner (OIC) may order a)
an insurer to take reasonably appropriate corrective action for any consumer harmed by a failure by the insurer, an entity
contracted to perform the insurer’s supervisory duties, or by the producer; b) a general agency, independent agency or the
Annuity transactions 160-Office of Insurance Commissioner
Form FN (Rev 1/00) 177,680.00 Request # 23-09-1
FNS063 Individual State Agency Fiscal Note 2 Bill # 1120 HB
producer to take reasonably appropriate corrective action for any consumer harmed by the producer’s violation; and/or c)
appropriate penalties and sanctions. OIC anticipates an average of an additional two enforcement cases per year to
address the new insurer and producer carrier requirements. Investigations and enforcement actions generally require
between 25-80 hours each, per enforcement case. For purposes of this fiscal note, it is assumed that investigations will
require an average of 40 hours per case and enforcement actions will require an average of 40 per case requiring 80 hours
(2 investigations x 40 hours) of an Investigator 3 and 80 hours (2 enforcement actions x 40 hours) of an Insurance
Enforcement Specialist beginning in FY2024. Additionally, in FY2024, one-time costs of 20 hours of an Insurance
Enforcement Specialist will be required to respond to industry and OIC staff inquiries; and provide advice and advisory
opinions about the implementation of the bill.
Section 2(12) authorizes the OIC to adopt rules necessary to implement and administer Section 2. In FY2024, ‘normal’
rulemaking is required to align Chapters 284-17 and 284-23 WAC with Section 2 of the bill.
Ongoing costs:
Salary, benefits and associated costs for .05 FTE Investigator 3 and .05 FTE Insurance Enforcement Specialist beginning in
FY2024.
Part III: Expenditure Detail
III. A - Operating Budget Expenditures
Account Account Title Type FY 2024 FY 2025 2023-25 2025-27 2027-29
138-1 Insurance State 48,908 13,939 62,847 27,878 27,878
Commissioners
Regulatory Account
Total $ 48,908 13,939 62,847 27,878 27,878
III. B - Expenditures by Object Or Purpose
FY 2024 FY 2025 2023-25 2025-27 2027-29
FTE Staff Years 0.3 0.1 0.2 0.1 0.1
A-Salaries and Wages 29,447 8,254 37,701 16,508 16,508
B-Employee Benefits 9,679 2,897 12,576 5,794 5,794
C-Professional Service Contracts
E-Goods and Other Services 9,782 2,788 12,570 5,576 5,576
G-Travel
J-Capital Outlays
M-Inter Agency/Fund Transfers
N-Grants, Benefits & Client Services
P-Debt Service
S-Interagency Reimbursements
T-Intra-Agency Reimbursements
9-
Total $ 48,908 13,939 62,847 27,878 27,878
III. C - Operating FTE Detail: List FTEs by classification and corresponding annual compensation. Totals need to agree with total FTEs in
Part I and Part IIIA
Job Classification Salary FY 2024 FY 2025 2023-25 2025-27 2027-29
Functional Program Analyst 4 80,952 0.1 0.0
Insurance Enforcement Specialist 88,056 0.1 0.1 0.1 0.1 0.1
Investigator 3 77,028 0.1 0.1 0.1 0.1 0.1
Senior Policy Analyst 108,432 0.2 0.1
Total FTEs 0.3 0.1 0.2 0.1 0.1
Annuity transactions 160-Office of Insurance Commissioner
Form FN (Rev 1/00) 177,680.00 Request # 23-09-1
FNS063 Individual State Agency Fiscal Note 3 Bill # 1120 HB
III. D - Expenditures By Program (optional)
NONE
Part IV: Capital Budget Impact
IV. A - Capital Budget Expenditures
NONE
IV. B - Expenditures by Object Or Purpose
NONE
IV. C - Capital Budget Breakout
Acquisition and construction costs not reflected elsewhere on the fiscal note and description of potential financing methods.
NONE
IV. D - Capital FTE Detail: FTEs listed by classification and corresponding annual compensation. Totals agree with total FTEs in Part IVB.
NONE
Part V: New Rule Making Required
Provisions of the bill that require the agency to adopt new administrative rules or repeal/revise existing rules.
Section 2(12) authorizes the Office of Insurance Commissioner to adopt rules necessary to implement and administer Section
2. In FY2024, ‘normal’ rulemaking is required to align Chapters 284-17 and 284-23 WAC with Section 2 of the bill.
Annuity transactions 160-Office of Insurance Commissioner
Form FN (Rev 1/00) 177,680.00 Request # 23-09-1
FNS063 Individual State Agency Fiscal Note 4 Bill # 1120 HB
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