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New York regulations protect seniors,
consumers from unethical selling practices
March 13, 2011-- New Yorkers are protected
by two new regulations to combat misleading
practices in the sales of annuities and life
insurance to senior citizens and other
The two emergency regulations that have been
put in place by the New York State Insurance
• Require that only a suitable annuity,
based on a consumer's financial situation
and needs, be recommended to a consumer by
an insurer, agent or broker.
• Prohibit insurance agents and brokers from
using titles, such as "certified senior
advisor", that suggest they have special
expertise on issues regarding seniors when,
in fact, they have no such qualifications.
"We have seen a number of cases where
consumers have been convinced to buy or
replace existing annuities with new
annuities that are not in their best
is very troubling, especially when
unsuitable annuities are being marketed to
senior citizens. These new regulations are
critical consumer protections, especially
for vulnerable seniors who need to ensure
that the retirement savings they built up
over a lifetime of hard work are secure,"
"Consumers, especially seniors, rely on
their agents and brokers to assist them in
making insurance decisions," Wrynn added.
"While the vast majority of agents and
brokers are honest and trustworthy, there
are those few, motivated by the commissions
they'll receive, who sell annuities that put
consumers' assets needlessly at risk or use
fictitious titles to mislead seniors into
thinking they are qualified to help. It is
our job to make sure that does not happen
and correct the problem when it does."
The first regulation is designed to stop the
sale of unsuitable or inappropriate
annuities such as:
• Convincing a consumer to switch from one
annuity to another when the benefits of the
new annuity are more than offset by the high
cost of surrendering the existing annuity
due to the surrender charges.
• Selling an annuity with a higher
investment risk or designed for a longer
term investment horizon to an elderly client
who is unlikely to live long enough to
realize the benefits from the annuity and
whose needs would be better served by some
other insurance product or investment.
Agents and brokers will now be required to
consider the insurance needs and financial
objectives of the consumer, based on the
facts disclosed by the consumer, when
recommending an annuity contract for
purchase or replacement, Wrynn said.
The regulation also requires that consumers:
• Be informed of various features of the
annuity being sold such as potential
surrender periods and charges; the
availability of cash value; potential tax
implications if the consumer sells,
surrenders or annuitizes the contract; death
benefits; and various fees which could be
• Benefits from certain features of the
annuity being sold, such as tax-deferred
growth, annuitizations or death or living
In New York, life insurance companies wrote
$17 billion in annuity premiums in 2009.
Annuities have increased in complexity, and
some now require buyers to assume
significant investment risk.
Deputy Superintendent for Frauds and
Consumer Services Joy Feigenbaum said,
"Annuities are no longer plain vanilla
products. Most people buy annuities thinking
their money will be safe. They need to know
all the risks they may be taking, and
whether each risk is appropriate for their
given situation. We cannot allow seniors to
unknowingly put their nest eggs in
The second regulation addresses the fact
that some agents and brokers use misleading
titles, such as "certified elder planning
specialist" or a "certified senior advisor"
to gain seniors' confidence in order to sell
them insurance products.
Many of these titles are obtained by agents
and brokers by simply paying a fee. In
recent years, the media have reported cases
of sales to elderly clients, resulting in
the loss of seniors' savings, by agents or
brokers utilizing these misleading titles.
This regulation prohibits the use of these
misleading titles and fraudulent marketing
practices linked to the use of such titles
in the solicitation, sale, or purchase of,
or advice made in connection with a life
insurance policy or annuity contract.
"Someone with an Internet certification and
no real expertise will no longer be able to
impersonate an agent or broker with real
training in issues affecting seniors," Wrynn
said. "Seniors need to be able to trust that
the title that their agent or broker uses
represents actual expertise, and this
regulation will help ensure that."
Wrynn offered tips for consumers considering
buying an annuity:
• Most annuities purchased today are
deferred annuities. These earn interest
until their maturity date. At that point,
income payments are scheduled to begin. When
trying to decide which annuity to purchase,
compare the current interest rate and how
long it is guaranteed for, the minimum
guaranteed interest rate, surrender charges
and how long they last, partial withdrawal
features (although not required by law, most
insurers offer a 10% free partial withdrawal
feature that is exempt from surrender
charges) and how the partial withdrawal
feature works in conjunction with any
minimum distribution requirements.
• Understand that there is a difference
between fixed annuities which make income
payments to consumers in fixed amounts and
variable annuities where the contract value
or the income payments can vary with
• Make sure you are purchasing an annuity
that has been approved for sale in New York.
Be wary of an agent who suggests that you
sign an application outside New York to
purchase a non-New York product.
• Remember that your annuity has a free-look
period. It is stated on the cover page of
the annuity and can be between 10 days and
30 days. It is extended to 60 days if you
are replacing an existing annuity with a new
annuity. If you change your mind during this
period after purchasing the annuity you can
return it for a refund of your premium.
If you have any questions about an annuity
you are thinking of purchasing or if you
have already purchased an annuity and have
questions, you can contact the Consumer
Services Bureau of the Department at
1-800-342-3736 for assistance.
Copies of the Department's Consumer Guide
for Annuity Products in New York are
available on the Department's website at
www.ins.state.ny.us. Copies of the
regulations are available at