Legislators sponsor anti-annuity fraud law
Bradenton Herald
February 18, 2009
By BRIAN NEILL - bneill@bradenton.com
With Florida’s aging population in mind, two local legislators have spearheaded an initiative that would bring harsher penalties to sellers of annuities who defraud their clients.
State Sen. Mike Bennett, R-Bradenton, and state Rep. Keith Fitzgerald, D-Sarasota, were in Tallahassee on Tuesday to announce the bi-partisan legislation that would make the practice of “twisting” a third-degree felony.
Twisting is when an agent falsely inflates a client’s net worth and converts his or her annuities into a single policy with a separate company to generate a commission.
The proposed legislation also carries other provisions to protect consumers from unscrupulous practices in the annuity industry.
Annuities are insurance contracts that offer a guaranteed series of payments over a period of time. Seniors may consider purchasing an “immediate” annuity that distributes payments right away or opt for a “deferred” annuity, which accumulates savings over a period of time before payments begin to be disbursed.
Part of the initiative for the proposed legislation grew out of complaints about annuity fraud that have poured in to the office of Florida Chief Financial Officer Alex Sink.
Sink’s office said complaints have quadrupled in the past three years and her department has opened 474 investigations on financial fraud involving seniors. About 70 percent of those cases pertain to annuity and life insurance transactions, her office stated.
One case involved an 81-year-old Port Richey woman whose agent converted her annuities into a single policy to generate a $52,000 commission for himself. The transaction would have depleted $300,000 of the woman’s life savings if authorities had not intervened, according to Sink’s office.
Last fall, Sink created the Safeguard Our Seniors Task Force to recommend ways to protect seniors from financial fraud.
Fitzgerald said the legislation is not a reflection on the annuity industry as a whole, rather it is meant to target those agents who would take advantage of uninformed clients.
“Some annuities may be a great idea for a 30-year-old but if you can’t draw money out of it for 20 years, it’s probably not a good idea for an 80-year-old to buy it,” Fitzgerald said. “So those are the types of abuses that are taking place.”
Bennett said the proposed legislation is intended to put more teeth into existing laws.
“Last year we passed legislation that tried to bring more focus on the amount of annuity fraud that is going on in our country and it didn’t seem to have as chilling an effect on the salesmen as we had hoped,” Bennett said. “So now we’re going to up the ante to a felony and we’re going to make sure that our senior citizens are protected.”
Other provisions in the proposed legislation include:
- Limiting the surrender charge period for an annuity sold to a senior consumer to five years and the surrender charge to 5 percent.
- Extending the “free look” period for the purchase of an annuity by a senior consumer from 14 to 60 days. Typically, the free look period extends only 10 days and allows a purchaser of an annuity to cancel the contract within that period without paying surrender charges.
- Authorizing the Florida Department of Financial Services to require an agent to make monetary restitution to a senior consumer they’ve harmed.
- Prohibiting 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.
- Requiring 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.
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 (877) 693-5236, or log on to www.MyFloridaCFO.com to file a complaint.