New N.Y. regulations take aim at those who scam seniors
New York insurance companies write about $17 billion annually in annuity premiums, according to the New York State Insurance Department. Over the past decade, annuity products have vastly increased in complexity, and many seniors don’t understand the risks that may be involved when they purchase these products and life insurance. To that end, the New York State Insurance Department recently imposed two new regulations to protect consumers:
- The first regulation requires that agents sell only “suitable” annuities, as defined by the consumer’s needs and financial situation.
- The second regulation bans brokers, agents and other salespeople from using false or misleading titles to fool consumers into believing that they have expertise as elder planning specialists.
These regulations are necessary because consumers too often are pressured by unscrupulous salespeople to buy or replace annuities they already have with those that are not in their best interests, according to New York Insurance Superintendent James Wrynn. These scams are especially cruel, according to Wrynn, because they take advantage of seniors who “need to ensure that the retirement savings they built up over a lifetime of hard work are secure.”
While most agents and brokers are honest, Wrynn says, the few who aren’t can wreak havoc on their victims’ savings for the sake of earning commissions.
Insurance scammers have developed a variety of sophisticated means of taking advantage of seniors. These scams range from the simple and obviously illegal (like stealing life insurance premiums) to the sophisticated (convincing a senior of modest means to pay extravagant fees to set up a living trust).
Prior to the advent of these new regulations, it was relatively easy for New York agents and brokers to sell inappropriate or unsuitable annuities, according to the New York State Insurance Department, because:
- Consumers might not understand how much actually it costs to let go of an existing annuity because of surrender charges.
- Seniors might not understand the consequences of buying a product with a long investment horizon. For instance, if you are 95 and you get an annuity with a 15-year horizon, you’d have to live to 110 to take full advantage of the program.
The new regulations require those selling New York life insurance and annuities to clearly discuss tax implications, fees, death benefits and other features of any annuity or policy they sell.