New York state insurance regulators put in place two new emergency regulations to protect seniors and other consumers from misleading annuities and life insurance sales practices.
The rules do the following:
- Prohibit insurance agents and brokers from using misleading titles, such as "certified senior adviser" or "certified elder planning specialist," that wrongly imply they have special expertise on issues related to seniors.
- Require insurance companies, agents and brokers to suggest only suitable products based on a consumer's financial situation and needs when they recommend annuities.
Regulators report cases of some insurance professionals persuading consumers to switch from one annuity to another when benefits of the new annuity are more than offset by the cost of surrendering the existing annuity, or selling an annuity with an investment horizon that's likely to outlast the elderly client's life.
"This is very troubling, especially when unsuitable annuities are being marketed to senior citizens," Insurance Superintendent James J. Wrynn said in a press statement. "These new regulations are critical consumer protections, especially for vulnerable seniors who need to ensure that the retirement savings they built up over a lifetime of hard work are secure."
Life insurance companies wrote $17 billion in annuity premiums in 2009 in New York. Annuities have increased in complexity, and some now require buyers to assume significant investment risk.
"Annuities are no longer plain vanilla products," Deputy Superintendent for Frauds and Consumer Services Joy Feigenbaum said in a statement." Most people buy annuities thinking their money will be safe. They need to know all the risks they may be taking, and whether each risk is appropriate for their given situation. We cannot allow seniors to unknowingly put their nest eggs in jeopardy."