The 2025 Best Interest Requirements: What New Insurance Agents Must Know Before Getting Licensed
If you’re preparing to start your insurance career in 2025, you’re entering the industry at a critical time. New regulations—particularly the Best Interest standard—are changing how annuity products are recommended and sold. Understanding this shift is essential before you take your licensing exam and begin working with clients.
The Best Interest standard was introduced as part of a broader consumer protection effort led by the National Association of Insurance Commissioners (NAIC). Under the revised Model Regulation #275, insurance agents must act in the best interest of the client when recommending annuity products, rather than simply ensuring the recommendation is “suitable.” This means agents must exercise reasonable diligence, care, and skill to meet the consumer’s financial objectives, disclose potential conflicts of interest, and document the basis for their recommendations.
States across the country are adopting this model, and California has implemented one of the most comprehensive versions. Effective January 1, 2025, California law requires all life insurance agents who sell annuity products to complete an 8-hour annuity training course that incorporates the Best Interest standard. In addition, agents must complete a 4-hour refresher course prior to each license renewal period to maintain compliance.
These training requirements are part of California Senate Bill 263 (SB 263), which expands regulatory oversight, adds transparency requirements, and enforces strict compliance with the Best Interest obligations. Agents who fail to meet the new standards risk losing their ability to sell annuity products and may face regulatory penalties.
What Future Agents Should Do Now
If you’re currently going through your insurance prelicensing, it’s important to do more than just pass the exam. You need to be aware of how this regulation will shape your day-to-day work. Here’s how to prepare:
- Understand the Best Interest standard early. Even before you’re licensed, begin learning what it means to act in a client’s best interest and how it affects annuity recommendations.
- Stay current on state-specific rules. Each state may interpret and implement NAIC guidelines differently. If you plan to work in California, study the SB 263 requirements.
- Learn strong documentation practices. You’ll need to document recommendations, demonstrate product comparisons, and show that your guidance serves the client’s long-term financial goals.
- Commit to ethical sales habits. The Best Interest standard makes ethics enforceable, not optional. Agents who prioritize commissions over clients will face consequences in today’s regulatory climate.
FAQs
What is the Best Interest standard?
It requires insurance agents to place the client’s financial interest ahead of their own when recommending annuity products.
Does this apply to all states?
Many states are adopting NAIC Model Regulation #275. California has implemented some of the most detailed requirements.
Is this part of the licensing exam?
While specific content varies by state, familiarity with the Best Interest standard is essential for success in both the exam and your career.
What happens if I don’t meet the new requirements?
Agents who do not complete the required training or who fail to comply with the Best Interest standard may be fined, lose their license to sell annuities, or face other disciplinary actions.
Where can I find updates on these rules?
The best sources are your state Department of Insurance and the NAIC website. Check regularly to stay informed.
Sources
- National Association of Insurance Commissioners (NAIC). Annuity Suitability & Best Interest Standard.
https://content.naic.org/insurance-topics/annuity-suitability-%26-best-interest-standard - California Department of Insurance. Annuity Training – Questions & Answers.
https://www.insurance.ca.gov/0200-industry/0050-renew-license/0200-requirements/life-only/questions-answers.cfm - California Department of Insurance. Notice – 2025 Best Interest Standard in Annuity Transactions.
https://www.insurance.ca.gov/0200-industry/0120-notices/upload/Notice-2025-Four-Hour-Annuity-Suitability-Best-Interest-Standard-in-Annuity-Transactions-Training-Course-Available.pdf