State regulators scrutinize annuity scams Stranger originated/owned annuities subject of public hearing
Posted on 5/20/2010
Courtesy of the National Association of Insurance Commissioners
WASHINGTON, D.C. - The National Association of Insurance Commissioners (NAIC) held a public hearing today on the emergence of Stranger Originated/Owned Annuities. The hearing, hosted by the NAIC Life Insurance and Annuities Committee, focused on the suspect practice of targeting seniors and terminally ill patients by inducing them to purchase an annuity largely for the benefit of investors or intermediaries.
Robert Mizzoni, an 83-year old man from Cranston, Rhode Island, told regulators how he and his wife were victims of an annuity scam. Federal prosecutors are currently investigating a Rhode Island attorney who placed ads in church newspapers offering immediate cash to individuals with terminal illness. The attorney's goal was to take advantage of the death benefit built into many variable annuities.
"These scams are like cockroaches. For every one you see, there are most likely hundreds in hiding," said Thomas R. Sullivan, Chair of the NAIC Life Insurance and Annuities Committee and Connecticut Insurance Commissioner. "Unfortunately, there is no way of knowing the full magnitude of this problem, but regulators are taking a diligent look at the conditions surrounding these sales and practices."
Other consumers, state regulators and industry representatives provided testimony during the hearing, which focused on the following issues: 1) whether these transactions are lawful; 2) how these transactions affect insurable interest; 3) whether current laws and regulations provide adequate consumer protections with regard to these transactions; and 4) if not, whether current laws and regulations need to be revised or new laws and regulations developed.
"This public hearing was an important opportunity to closely examine the conditions of these practices," said Adam Hamm, Vice Chair of the Committee and North Dakota Insurance Commissioner. "It is apparent further safeguards are needed to protect consumers from unscrupulous practices."