Disputes often arise in connection with the sales of annuities. Consumers may allege that the sales agent did not fully disclose or describe the complexity of the formulas used to determine the rate of returns/interest (which arises in the sale of equity indexed annuities), the risks associated with the investments/funds/sub-accounts that may be purchased within the annuity itself (which arises in the sale of variable annuities), or the scope and extent of the surrender or withdrawal charges, fees, or penalties that may be incurred (which arises in the sale of any type of annuity). Consumers may also allege that the sales agent affirmatively represented, both orally and in writing, that the annuity provides certain benefits and features (such as guaranteed rates of return) that simply are not available upon review of the fine print of the annuity policy. Consumers may argue that the sales agent is motivated by the significant commissions earned on the sale of annuities.
Even if the sales agent does not misrepresent or fail to disclose certain features of the annuity, the annuity may be an unsuitable investments for a consumer and particularly, for retirees and seniors. Laws exist that set forth specific parameters for the sale of annuities to consumers. For example, Florida statutes specifically govern the sale of annuity investments. Insurers and agents are required to gather extensive information related to the consumer which is reasonably appropriate to determine the suitability of a recommendation made to the consumer, including the following: 1. Age; 2. Annual income; 3. Financial situation and needs, including the financial resources used for funding the annuity; 4. Financial experience; 5. Financial objectives; 6. Intended use of the annuity; 7. Financial time horizon; 8. Existing assets, including investment and life insurance holdings; 9. Liquidity needs; 10. Liquid net worth; 11. Risk tolerance; and 12. Tax status.
Florida law also provides that insurers and agents must have a reasonable basis to believe that the consumer has been reasonably informed of various features of the annuity, that the consumer would actually benefit from certain features of the annuity, that the particular annuity as a whole, including sub-accounts and product enhancements, is suitable, that the entire transaction as a whole is suitable, and where an annuity is replaced or exchanged, that the replacement or exchange may result in the loss of benefits or incur fees and charges.
Some of the common scenarios that may involve negligent, fraudulent, or deceptive annuity sales include:
- Promising a guaranteed rate of return.
- Promising that there are no charges, fees, or penalties associated with the purchase of the annuity.
- Providing an overly simplistic sales pitch that fails to accurately describe or disclose the actual terms of the annuity.
- Selling the annuity to an individual who needs access to his or her money for living expenses.
- Selling the annuity to a senior or retiree.
- Recommending the purchase of a “new” annuity not long after the purchase of an “older” annuity.
- Promising that the charges, fees, or penalties incurred on the sale of an “older” annuity will be “offset” by a “bonus” on the purchase of a “new” annuity.
- Promising that the annuity is a “no risk” investment.
- Recommending the purchase of multiple annuities.
Various types of legal claims may exist and arise in the context of the annuity sales. The claims may include:
- Negligent Supervision
- Breach of Fiduciary Duty
- Intentional Misrepresentation (Fraud)
- Negligent Misrepresentation
- Violations of Securities Statutes
- Violations of Financial Exploitation/Vulnerable Adult/Elder Abuse Statutes
Please contact Ewusiak Law, P.A. for more information.