Why annuities draw scrutiny
An enormous amount of money flows into annuities through new purchases, exchanges and rollovers. Annuities have their place, but they often carry higher fees and surrender charges that fund agent and broker commissions and make the product costly to exit. Examples of possible abuses include:
- Selling a deferred contract to someone who needed immediate income
- Convincing owners only a few years from the end of their surrender period to exchange into a new contract with a new eight to ten year surrender period
- Not disclosing fees on withdrawals
- Moving people from guaranteed contracts into annuities or life policies that can lose value in a market decline
- Encouraging people to borrow from their contracts
Florida’s protections
In 2008 the Florida Legislature passed the John and Patricia Seibel Act, named for an elderly Florida couple who were victims of a blatantly unsuitable annuity sale. It requires agents and brokers to:
- Gather financial and other information before recommending a purchase or exchange
- Know your existing annuities and investments
- Perform a written suitability analysis
- Confirm your understanding of the recommendation in writing
- Deliver required disclosures, including the Annuity Buyer’s Guide, the contract summary, any prospectus, and the comparison form when replacing a contract
In 2013, CS/CS/SB 166 adopted the NAIC model regulation on annuity suitability and extended these protections to consumers of all ages. It also requires agents to record their recommendations, prohibits them from discouraging consumers from answering suitability questions or filing complaints, and expanded the unconditional refund period from 14 to 21 days.
Failing to follow these rules can expose the agent or broker to liability for your losses. If you or a family member was sold an unsuitable annuity, call Mr. Sapourn.