State Officials Cracking Down On Annuities Being Sold To Seniors

imageThe Register Guard is reporting that Oregon state officials ordered Bankers Life and Casualty Co to refund money to some of the senior citizens to whom it sold annuities.  The company was also told to "overhaul the way it does business," said Cheryl Martinis, a spokeswoman for the state Department of Consumer and Business Services.     

Bankers Life and Casualty Co. has already given refunds, on the state’s orders, to approximately 20 seniors who were sold about 30 annuities, Martinis said Thursday.  "In a huge number of cases, the annuities tied up all their money so they didn’t have enough to pay expenses," she said. "One man from the [Willamette] Valley had a very sick wife. [The annuity] tied up money he had had in the stock market. He had to do a reverse mortgage to pay for home health care.”

According to the article, many of the seniors had no idea they were buying annuities and in one case, the buyer had dementia.  Some of the buyers already had long term care policies with the company and were responding to solicitations about ways to lower their medical costs.  Instead, they were sold annuities.


State officials said Bankers Life has cooperated in developing the action plan laid out in the state’s order, and agreed to the order and the fine.  Martinis said Bankers Life has been ordered to review other annuities it has sold, offer refunds if the sales were unsuitable, and take steps to protect future clients. The details of how the review will be conducted are still being worked out, she said, adding, "Not everybody has a policy that is unsuitable."

Insurance firm fined over sales to seniors

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  • Any person or regulator that understands the difference between an immediate annuity (IA)(can provide a lifetime stream of income) and a deferred annuity (DA)would know that the IA is a “suitable product”. I have been selling both kinds for over thirty years and will be using the proceeds from a RM to fund a new IA for myself. My broker dealer had me sign a question on a compliance review that said “annuities” could not be bought with borrowed monies. This is wrong, and the RM and securities industries should clarify the difference between an IA and a DA.

    By the way how are the “tenure Payments” guaranteed?
    What if the lender defaults/goes bankrupt etc.? Also, an IA would have larger payments (subject to some taxes)and you get to pick the Ins. Co. and don’t forget the State insurance funds that back annuities up. I would love to get clarification on these issues as I am not that up to date on RM “tenure”.

  • Good for the State Of Oregon!!!! To ban either type of annuity is not wrong, DDuck: A line of Credit with an approximately four per cent growth on unused monies as one ages is all a Senior needs. To have an insurance Company tie up a Senior’s money , subject to premature withdrawal charges and a second sales commission, is not wise and, in my opinion, criminal. Plus, the Senior may need more than just a monthly income amount to cover home repair charges, health care costs, or some other Senior need. This Industry needs to create a National Public Relations Campaign to warn Seniors against unscrupulous reverse mortgage/annuity insurance sales thieves who prey on what may well be the Seniors last substantial asset.

  • Sorry, the “industry” needs to know the difference between an IA (an option to a line of credit or tenure) and a DA (may be bad for most because of contingent deferred charges for first seven years) if the typical free right of 10% withdrawal is not enough. Unscrupulous sales people are bad for any industry, by the way. However, we should also keep our options open to use “good” financial tools. Interesting articles are pro life-time payments in

  • Pray tell, DDuck, why if you are so proud of what you recommend for Seniors, do you hide behind an alias when you write? Frankly, subject to a review by a Relative, a Respected Friend, a Family Attorney or
    a Government Social Services Professional, I don’t
    care what a senior does with his/her money. As long as there is no unwarranted sales pressure and the Insurance Salesman’s commission is capped at $250.00, and the Senior has immediate and complete access to their funds without absolutely NO–repeat–NO early withdrawal fees, I truly don’t care what the Senior does of their own volition with THEIR money. However, the Senior already has a Line-Of-Credit with a growth rate of approximately four percent thru FHA’s HECM insured reverse Mortgage; Sure, the insurance annuity may pay a little higher interest but at what cost now: an obnoxiously high sales commissiion and excessive withdrawal fees. Not in the best interest of any Senior, in my opinion.

  • I am glad to see they are looking closely at the annuity purchase practice. I also wish they would look at financial institutions, mortgage companies and brokers that refinance seniors from one home equity loan to another with no real benefit to the borrower. Reverse Mortgage has the Anti-churn requirement/test. Forward mortgage should have the same concept, maybe they do in some states, I don’t know. I also think that anyone 60 or older applying for a any Mortgage, Refi or HELCO should be required to seek counseling just like a reverse mortgage.

  • First of all I use dduck at my choice. I am a CLU, ChFC and am a Series 7 and and in the financial services industry for over 30 years. I have owned up to 6 annuities at any one time and I have never had a complaint against me. As of this writing I am only recommending a RM for myself and either tenure or an IA FOR MYSELF. I am gathering information at this point and am keeping an open mind. By the way, if an insurance professional gives good honest guidance, then he deserves what ever the commission rate is (about 4%) and I also should let you know that you can buy annuities that don’t pay a commission.
    I suggest that if you knew more about annuities that you would see they are just another financial planning tool.

  • DDuck, All the fancy titles don’t mean a damn thing, if the Senior’s best financial interest doesn’t come first. Sorry the proceeds of a reverse mortgage should
    not be put into an annuity of any kind, in my opinion. It just isn’t financially necessary or benefical. And to Mr. Dave Stormont: You are one hundred per cent correct. We all see Seniors in their 70s and higher who cannot qualify for an FHA HECM because of loan to value. Those Seniors should have been counseled about the benefits of a Reverse mortgage when applying for a new, forward home loan at
    an earlier age. Don’t get me started on banks, Dave. Mortgage Brokers have to be State licensed but not Bankers–because they have a more powerful lobby in Washington, D.C!!!! FHA should require all dealing with the sale of FHA HECM products to Seniors to be licensed. Don’t tell me how honest, upright, and consumer oriented banks are: Just look at the terrible financial siuation the Country is in now–the greed of some banks is a real part of the problem.

  • Alas, dduck, you remind me of the fourth grader who if he couldn’t be the boss, took his ball and went home. Un-reasonable?; I suspect my reverse mortgage clients would have a different view. Almost fifty years ago The Procter and Gamble Distributing Company taught a young Salesman a wonderful and lifelong lesson: “Take
    care of the Client first, Nelson, within the limits of Company policy. Then, the Client will in turn take
    proper care of you and The Procter And Gamble Company.”
    It works!!!!!!!

  • I have yet to receive one schedule demonstrating the cash flow from any annuity product on both a pre and post income tax basis based various scenarios of age and life expectancy. It is on this basis and only this basis that one can begin making observations on the advisability of using HECM proceeds to buy an annuity rather than using its tenure payment feature.

    For people who have passed an examination of the laws related to the sales of insurance, securities, and other financial products, it seems they could do this but I have yet to meet one who will. It seems like the financial presentation skills of too many annuity sales people end with their licensing and learning how to answer objections.

    Mr. Nelson, like you, I believe in licensing and would like to see it come about in our industry.

  • For a rough idea of a fixed annuity payout on an Immediate Annuity go to: Or ask a CLU, ChFC or CFP (we don’t bite) or call Vanguard, TIAA or any reputable insurance company. For example, I did one for myself on a RM with a $251,960 (IBIS) (Male 70, Female 66)a month, tax free as long as you reside in the home (payments stop if you sell and the loan becomes due). The figures from the above web site was $1532/mo based on Joint and Survivor 100% including AFTER one leaves the home. Of course part of the payments ARE taxable according to an exclusion ratio so you need to factor that in. Hope this clarifies this a little. I have no ax to grind but some articles in seem to prefer life payouts.

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