By Cyril Tuohy
California Gov. Jerry Brown has signed into law a bill requiring new disclosure language for immediate annuities commonly sold to seniors, language that is already required in the sale of deferred annuities, state officials said.
The law takes effect July 1, 2015.
Backers of the law said clearer disclosure language was necessary in the wake of what they say are questionable sales tactics, which have cast a pall on agents and advisors.
Insurance agent Glenn Neasham, of Hidden Valley, Calif., was found guilty of theft in 2011 in connection with the 2008 sale of an Allianz MasterDex 10 annuity for an 83-year-old woman who turned out to be suffering from dementia at the time.
Neasham’s conviction was overturned by an appellate court last fall, but not before industry commentators began to wonder whether every insurance agent selling an annuity might be similarly in danger.
Insurance Commissioner Dave Jones said in a news release that the new disclosure requirements offer consumers important new protections.
The law, Jones said, “ensures consumers have the necessary information when considering these long-term investment products, which can tie-up a senior's money for decades."
Individual and group disability, and group life insurance policies and certificates, must contain 12-point bold type on the front of the policy, and policyholders can return the policy by mail or “other delivery method.”
Under the new law, advisors, agents and group master policy owners collecting one month’s premium from a policyholder 60 years old or older must provide a prorated refund of premium in case of cancellation during the first 30 days of the policy period.
Cancellation rights must be printed on the front of the policy jacket or on the coverage page or every individual life policy and every individual annuity contract, the new law stipulates.
In addition, the law requires cancellation and refund disclosures to pertain to modified guaranteed annuity contracts, as they are already with variable individual life insurance policy and variable annuity contracts.
Insurers must also call a “surrender charge” a “withdrawal penalty.”
Policies and annuity contracts that contain a surrender charge or a penalty of any kind must contain a notice disclosing the location of the charge, the charge time period, charge information and any penalty information in bold 12-point print on the front of the policy jacket, California Insurance Department officials said.
The law, sponsored by the California Insurance Department, was authored by Assembly Member Lorena Gonzalez.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at email@example.com.
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