A California producer recommends that a 68-year-old client surrender his existing deferred annuity and purchase a new annuity with a different carrier. Under California Insurance Code §10509.4 and the CDI replacement regulations, the producer must:

Explanation

Under California Insurance Code §10509.4 and the CDI's replacement regulations (10 CCR §2698.30 et seq.), a 'replacement' transaction — defined broadly to include any new policy whose purchase involves discontinuing, surrendering, lapsing, forfeiting, or otherwise reducing benefits on an existing life or annuity contract — triggers strict notice and comparison requirements. The producer must present and obtain a signed 'Notice Regarding Replacement of Life Insurance and Annuities,' list each contract being replaced, submit the notice to BOTH the existing and the replacing insurer, and provide written comparison information; that is the response describing the signed notice sent to both carriers with required comparison disclosures. The response making the recommendation orally and documenting it only after the client signs is wrong; oral, post-application recommendations violate the rules. The response letting the producer use any form he chooses and skip notice to the existing carrier invents producer discretion. The response skipping the disclosure whenever both contracts come from the same insurer is wrong; INTERNAL replacements at the same insurer are still subject to replacement rules (with limited exceptions). Senior replacement scrutiny is especially high.