ATTORNEY NEWSLETTER
Unethical Agents And Aggressive Sales Tactics
Deliberate Omissions Of Important Information
False Promises And Misrepresentations
Evans Law Firm, Inc. recommends against annuities for older consumers because they are expensive and complicated and because these contracts tie up a senior’s money for years. Deferred annuities impose significant surrender penalties if you need your money before the annuitization phase kicks in. Sales tactics can be aggressive and agents may fail to provide all the information you need to understand how a policy works. A deferred annuity policy by its own terms may be unsuitable and the sales tactics illegal. The California Elder Abuse Act and Insurance Code protect seniors in annuity transactions and under these statutory schemes, the policy itself and the way in which it is sold may both be forms of financial elder abuse and violations of the California Insurance Code. Cal. Weld. & Inst. Code § 15610.30 (definition of financial elder abuse); Cal. Ins. § 790 et seq. (Unfair Insurance Practices Act). Both statutes allow victims to sue for damages and other relief including awards of attorneys’ fees and expenses for bringing your case. Cal. Welf. & Inst. Code § 15657.5. If you are over 60, live in San Francisco or elsewhere in the Bay Area or throughout the State of California and own a deferred annuity, call us today at 415-441-8669 (or toll free at 1-888-50EVANS) for a free review of your policy.
Questionable Sales Tactics
Sales commissions on deferred annuities are often as high as 15 percent so agents are incetivized to close sales on these contracts as quickly as possible. Chasing those commissions agents may use high-pressure sales tactics at free lunch seminars or misleading advertising. For example, advertised “teaser” rates may look promising but only last for a short time and be reduced by contract fees. Sales commissions and fees mean that money stuck in deferred annuities typically underperforms direct investments in stock and bond funds.
Exchanges And Replacement Transactions
Unethical agents often try to frighten older clients into exchanging existing annuities for new ones, claiming they are missing out on benefits (like higher income) they will need as they age. California insurance law protects seniors from unsuitable exchanges (see, e.g., Cal. Ins. Code §10509.914), but agents still push exchanges into unsuitable contract. There are several dangers in contract exchanges: surrender penalties on the surrendered contract, tax on the proceeds from the surrendered contract, and the surrender period resets under the new contract, tying up your money for even more years. Another danger for consumers is where agents “churn” annuities by recommending a succession of surrenders and exchanges. This activity is illegal. In a recent case[1], the California Department of Insurance revoked an agent’s license and imposed a fine where the Department found that the agent had recommended to at least three of his older clients that they purchase unnecessary replacement policies in nine allegedly separate transactions.
Surrender Penalties
Perhaps the greatest danger for seniors in annuity contracts is the surrender charges or withdrawal penalties imposed anytime you need your money back. Surrender charges under deferred annuity contracts can be as high as 15% and may continue for ten years or more. Surrenders also result in the loss of other policy benefits. In addition to the surrender penalty and loss of benefits, you may face a tax bill on the amount surrendered at ordinary income tax rates. Contributions to an annuity are tax-deferred, but any withdrawals you make will be taxed at your regular income tax rate, not the long-term capital gains tax rate.
Contact Us
If you are over 60 and live in San Francisco or elsewhere in the Bay Area or State of California and have a deferred annuity or universal life insurance contract, we can review your contract for free. You can reach Ingrid M. Evans at Evans Law Firm, Inc. at (415) 441-8669, or toll free at 1-888-50EVANS or by email at <a href=”mailto:info@evanslaw.com”>info@evanslaw.com</a>.
Some significant issuers and distributors of fixed, variable and fixed indexed deferred annuities in California are listed below. We are not in any way suggesting that any of these carriers or distributors has done anything wrong. The list is provided solely as a reference for our readers.
AIG/American General Life Insurance Company
Allianz Life Insurance Company of North America
American Equity Investment Life Insurance Company
American General Life Insurance Company/AIG
American International Group, Inc. (AIG)
American National Life Insurance Company
Athene Annuity & Life Assurance Company
Athene Annuity and Life Company
Athene USA
Aviva Life Insurance Company
AXA Equitable Financial Services, LLC
AXA Equitable Life Insurance Company/AXA US
AXA Advisors, LLC
Brighthouse Financial, Inc./MetLife
EquiTrust Life Insurance Company
Fidelity & Guaranty Life Insurance Company
Genworth Financial, Inc.
Genworth Life and Annuity Insurance Company
Genworth Life Insurance Company
Guggenheim Partners, LLC
Guggenheim Partners/Security Benefit Life Insurance Company
ING USA Annuity and Life Insurance Company
Jackson National Life Insurance Company
John Hancock Life Insurance Company
Lincoln Benefit Life Company
Lincoln Financial Group
Massachusetts Mutual Life Insurance Company
Metlife/Metropolitan Life Insurance Company/Brighthouse Financial, Inc.
Minnesota Life Insurance Company
Nationwide Investor Services Corporation (NISC)
Nationwide Life and Annuity Insurance Company
Nationwide Life Insurance Company
New York Life Insurance Company
Northwestern Mutual Investment Services, LLC
Northwestern Mutual Life Insurance Company
Northwestern Mutual Wealth Management Company
Pacific Life & Annuity Company
Pacific Life Insurance Company
PacLife
Security Benefit Corporation
Security Benefit Group, Inc.
Security Benefit Life Insurance Company/Guggenheim Partners
Security Investors, LLC
Security of Denver Life Insurance Company/Voya
Transamerica Life Insurance Company
Voya Financial Advisors
Voya/Reliastar Life Insurance Company
World Financial Group Insurance Agency, Inc.
[1] Evans Law Firm, Inc. was not involved in this case in any way.
