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Ohio Alerts Seniors on Annuities Sales Practices

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STATE OF OHIO

DEPARTMENT OF INSURANCE
COMMUNICATIONS OFFICE
 

Wednesday, December 05, 2007

Insurance Department Alerts Seniors to Predatory Annuities Sales Practices

Reports of deceptive conduct being used by some agents to sell products

COLUMBUS - Due to an increase in predatory sales practices associated with the sale of annuities, the Ohio Department of Insurance is alerting seniors about how to avoid becoming a victim, Insurance Director Mary Jo Hudson announced.

The Department has recently received information that some agents are "churning" business by encouraging their senior clients to replace an old annuity product with a new annuity product that allegedly offers a higher rate of return. In many cases, the replacement is unnecessary and the senior citizen could face high surrender charges and fees if they need to withdraw money from the annuity. Since there are substantial commission rates associated with the sale of annuity products, some agents may recommend an unsuitable product to a senior for their own personal gain.

"Ohioans need to carefully review any insurance product they are considering and consult a trusted advisor or the Ohio Department of Insurance at 1-800-686-1526 with any questions," Director Mary Jo Hudson said. "We are closely watching the marketplace to assure Ohio-licensed insurance agents are selling suitable annuity products to seniors."

Rules that became effective in March 2007 give the Department more regulatory authority and oversight over the sale of annuity products. Not only were suitability standards put in place, the new rules clearly provide Ohio-licensed insurance companies and agents with an outline of what is considered appropriate annuity sales conduct.

Under the new guidelines:

  • Insurers and agents are required to establish a system to supervise appropriate annuity product recommendations and to maintain written procedures and conduct periodic reviews to detect rule violations.
  • Third parties can be hired to monitor the recommendations, but insurers and agents are responsible for making sure the third party is performing those tasks.
  • Agents are required to obtain information about the consumer's financial status, tax status and investment objectives before making any annuity sale.
  • Insurance agents and companies are to provide consumers with certain minimum disclosures about the features of the annuity product and a National of Insurance Commissioners (NAIC) consumer guide so an informed decision can be made.

    Consumers may be deceived in many ways. While anyone can be a victim, seniors remain a prime target.

    To avoid being a victim of a predatory sales practice, consumers should be weary of:

  • High-pressure sales pitch. If a particular group or agent has contacted you repeatedly, offering a "limited-time" deal that makes you uncomfortable or aggravated, trust your instincts and steer clear.
  • Quick-change tactics. Skilled scam artists will try to prey on your "time fears." They may try to convince you to change coverage quickly without giving you the opportunity to do adequate research.
  • Unwilling or unable to prove credibility. A licensed agent will be more than willing to show adequate credentials.
  • Remember, if it seems too good to be true, it probably is!

     

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