Legislation seeks to protect seniors from insurance fraud
Gov. Jon S. Corzine signed legislation this week giving consumers a 10-day right to cancel annuity contracts without penalty and requiring licensed annuity sellers to follow marketing and disclosure guidelines.
Known as the Predatory Annuities Prevention Act, the legislation is based on three national model regulations.
An annuity is a contract between a consumer and an insurance company or other entity. The consumer makes a lump-sum payment or series of payments, and in return, the insurer agrees to make periodic payments beginning immediately or in the future.
The bill prohibits those who sell annuities from falsely representing their expertise on marketing materials or risk loss of license. In addition, annuities salespeople are required to fill out disclosure forms that clearly outline the important facts of the purchase to the buyer, the investment objectives and contract terms. The buyer then has a 10-day right to cancel with no financial penalty.
"With nearly $15 trillion dollars invested by people over the age of 50 in this nation, the senior population is very dependent on their investments yet susceptible to disingenuous investment practices. This important bill, spearheaded by our friends at the AARP and embraced by committed legislators, seeks to protect unsuspecting New Jersey seniors from dangerously risky annuities," the governor wrote in a statement.
In the past few years, some insurance companies have been sued over their marketing of annuities, and consumers have alleged they were misled about the products, tricked into overpaying for annuities that eventually paid them much less than expected.
The governor's office estimates Americans lose about $10 billion each year in fraudulent investments.
"This bill will prevent unscrupulous insurance brokers from using inaccurate puffed-up titles such as 'elder financial expert' to describe themselves when selling annuities to seniors," Department of Banking and Insurance Commissioner Steven M. Goldman said.
Primary sponsors of the legislation include state Sens. John H. Adler,
D-Camden, and Robert W. Singer,
R-Burlington, Monmouth, Ocean, Mercer, and Assemblywoman Nilsa Cruz-Perez, D-Camden, Gloucester.
For consumer tips on all types of annuities, visit the Securities and Exchange Commission at:
www.sec.gov/investor/pubs/
varannty.htm
or the Financial Industry Regulatory Authority at:
www.finra.org/Investors/
ProtectYourself/
InvestorAlerts/index.htm
FINRA, the largest nongovernment regulator for all securities firms in the U.S., was created in July 2007 through the consolidation of the National Association of Securities Dealers and the New York Stock Exchange's member regulation, enforcement and arbitration functions.
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