February 18, 2009
CFO SINK ANNOUNCES LEGISLATION TO HELP SAFEGUARD FLORIDA SENIORS
Bi-Partisan Legislation Sponsored by Senator Mike Bennett (R-Bradenton) and Representative Keith Fitzgerald (D- Sarasota)
TALLAHASSEE – In 2006, Bonnie Madden, 81, from Port Richey, purchased two annuities from insurance agent Randolph Kahl-Winter. A year later, her agent engaged in a practice known as “twisting” when he falsely inflated Madden’s net worth and converted her annuities into one annuity policy with a different company in order to generate a $52,000 commission for himself. The agent’s action would have cost Madden nearly $300,000 of her life savings if the Department of Financial Services had not intervened.
Chief Financial Officer Alex Sink said it is because of Madden, and others like her, that she has teamed up with key lawmakers to push for tougher penalties for unscrupulous agents who defraud senior investors and establish better disclosures and protections upfront for seniors who invest in these products.
Sink said her department has heard from hundreds of seniors and their families who say they were convinced to liquidate annuities, CDs, stocks and savings accounts to fund new annuities only to discover these actions robbed them of their savings.
“The number of complaints from Florida seniors about annuities has nearly quadrupled in the last three years,” said Sink, whose department has opened 474 investigations on financial fraud involving seniors, with approximately 70 percent of cases related to annuity and life insurance transactions. “Better financial protections for our growing population of senior residents and tougher consequences for those who defraud our seniors demand our immediate attention.”
Florida is currently home to more than 2.9 million Floridians over the age of 65. The state’s senior population is projected to grow by as much as 30 percent, and many of these seniors will look into investing in annuities. An annuity is an insurance contract that offers a guaranteed series of payments over a period of time. Seniors may consider purchasing an “immediate” annuity, where payments begin right away, or “deferred” annuities, which accumulate savings over a period of time before payments begin.
Joining Sink at a press conference in Tallahassee to announce legislation was State Senator Mike Bennett (SB 1372) and State Representative Keith Fitzgerald. Sink was also joined by Jack McRay from AARP and several members of the Safeguard our Seniors (SOS) Task Force. Sink created the SOS Task Force last fall to examine and recommend solutions to better protect Florida seniors against financial fraud, with a specific focus on annuity fraud.
“This legislation is so important as more seniors move to Florida and seek to invest their hard-earned savings,” said Senator Bennett. “We will not tolerate any agent who steals from, misleads or lies to our state’s senior investors.”
“Annuities can be an effective investment tool for many Floridians wanting a steady stream of income for retirement,” Fitzgerald said. “But agents must be held accountable for the financial harm they inflict when they steer our state’s seniors into inappropriate annuity products.”
Under the legislation, the act of “twisting” an annuity to a senior consumer would be a third degree felony, bringing this violation in line with the penalty currently applied to a securities broker-dealer under Florida law. Other protections under the proposed legislation also:
- limit the surrender charge period for an annuity sold to a senior consumer to five years and the surrender charge to 5 percent; extend the “free look” period for the purchase of an annuity by a senior consumer from 14 to 60 days;
- authorize the Department to require an agent to make monetary restitution to a senior consumer they’ve harmed;
- prohibit the Department from issuing another license to a former licensee who has had his or her license revoked resulting from the solicitation or sale of an insurance product to a senior consumer.
- require an insurer to provide a cover sheet attached to the policy when an annuity is issued informing the purchaser about the free look period and about how to contact the insurer and the department if they have questions about the annuity.
The Safeguard Our Seniors Task Force includes representatives from AARP Florida, the Department of Veterans’ Affairs, Insurance Consumer Advocate, Offices of Insurance Regulation and Financial Regulation, NAACP, Florida Bar, American Council of Life Insurers, insurance agents and securities broker-dealers.
To learn more about the SOS Task Force or what to consider when purchasing annuities, visit www.FLSeniors.net. Senior Floridians who believe they may have been the victim of annuity fraud should call 1-877-My-FL-CFO or log on to www.MyFloridaCFO.com to file a complaint.
As a statewide elected officer of the Florida Cabinet, Chief Financial Officer Alex Sink oversees the Department of Financial Services, a multi-division state agency responsible for management of state funds and unclaimed property, assisting consumers who request information and help related to financial services, and investigating financial fraud. CFO Sink also serves as the State Fire Marshal.