Tougher Florida Annuities Bill Clears Second Hurdle
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March 31, 2009 Tuesday 04:38 PM EST
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Tougher Florida Annuities Bill Clears Second Hurdle
Sean P Carr
TALLAHASSEE, Fla.
A bill to toughen rules on the sales of annuities to senior citizens and impose stiffer penalties for malfeasance advanced in the Florida Senate.
The legislation would classify fraudulent acts, including "twisting" or "churning" of annuities for residents 65 and older by an insurance agent, as a third-degree felony. This is in line with the penalty currently applied to securities broker-dealers. Practices known as "twisting" and "churning" include fraudulent acts to persuade consumers to cash in funds from a current investment or insurance product in order to purchase another investment product.
It would also limit surrender charges to 5% and the surrender charge period sold to a senior consumer to five years and would extend the "free look" period for the purchase of an annuity by a senior from 14 to 30 days. It would also authorize the Department of Financial Services to make monetary restitution to a senior consumer who has been harmed and prohibit FLDFS from issuing another license to former licensees who have had theirs revoked as a result of soliciting or selling an insurance product to a senior consumer.
Third-party marketers would be classified as affiliates of an agent if they aid or abet the licensee in an insurance code violation involving the sale of an annuity to a senior.
The state Senate Criminal Justice Committee and the Banking and Insurance Committee have each ratified S. 1372. The bill, which has the strong backing of Chief Financial Officer Alex Sink and Insurance Commissioner Kevin McCarty, is sponsored by Sen. Michael Bennett, R-Dist. 21.
Life insurers asked for provisions limiting penalties to the improper sale of annuities to be broadened to include a broader range of financial services products, including mutual funds and securities, said Bruce Ferguson, senior vice president of state relations for the American Council of Life Insurers. Including other banking and securities products in penalty provisions was done "so as not to single out one product for disparate treatment," he said.
"There's no place in our business for people that defraud consumers," Ferguson said.
Sink said FLDFS has opened 474 investigations on financial fraud involving seniors, 70% of which are related to annuity and life insurance transactions. "The number of complaints from Florida seniors about annuities has nearly quadrupled in the last three years," she said in a statement.
In 2008, Gov. Charlie Crist signed legislation doubling penalties, to as much as $250,000, for churning or other specified willful unfair or deceptive life insurance and annuity sales practices when the victims are seniors or disabled persons. The law also requires an insurer or insurance agent to have an objectively reasonable basis for believing that an annuity recommendation to a senior consumer is suitable. The law increased from 10 days to two weeks the time allowed for unconditional refunds, mandated the use of an approved form in performing a suitability analysis and required those licensed to solicit or sell life insurance to complete three hours of continuing education on suitability in annuity transactions. Life insurers and Florida regulators both backed the act (BestWire, July 2, 2008).
(By Sean P. Carr, senior associate editor, BestWeek: [email protected])
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