Insurance Companies Face Tougher Rules on Annuities
Bauerlein, David, The Florida Times Union
Byline: DAVID BAUERLEIN
Florida Chief Financial Officer Alex Sink wanted "alligator teeth" for state laws punishing unscrupulous sales of annuities.
A bill passed by the Florida Legislature doesn't bite down as hard as the original attempt to make it a felony for unscrupulous agents to take advantage of seniors.
But the bill would toughen enforcement by levying bigger fines and adding some consumer protection for seniors who purchase annuities.
Known as the Safeguard Our Seniors bill, the legislation would take effect July 1 if signed by Gov. Charlie Crist.
Sink, who is running for governor, has been working for three years to get tougher penalties. Seventy percent of the cases her office has investigated regarding financial fraud against seniors involve annuities.
"It is a small number of agents who do this, but when they do, it wreaks havoc on the lives of seniors," said Nina Banister, spokeswoman for Sink. "It just is very painful."
An annuity is a contract sold by insurance companies that provides a guaranteed source of income for future years, an arrangement that makes them most popular among seniors in their retirement years. Customers purchase annuities by making a lump sum payment or a series of payments. The payback from the annuities can start immediately, or be deferred to let the premium build up over a period of time before payouts begin.
Two practices that would be targeted by the tougher penalties are known as twisting and churning.
Twisting occurs when an agent makes misleading, incomplete or fraudulent presentations to get someone to change a current insurance policy or buy a policy with a different insurer.
Churning occurs when an agent persuades a customer to drop one product and switch to another product offered by the same insurer, purely to generate a commission for the agent.
Twisting and churning are first-degree misdemeanors. Sink has tried in the past to make those felonies. The bill doesn't go that far but it would authorize a $75,000 administrative fine, up from the current maximum fine of $40,000 for willful violations.
Salesmen earn commissions when they sell annuity contracts, so being able to impose bigger fines will deter some agents from "taking a chance in the first place," Banister said.
In addition, annuities sold to people 65 or older would carry a maximum 10-year period for "surrender charges. …