Life insurance company to change sale of annuities following settlement
Lori Swanson (D)
ST. PAUL, Minn. (Legal Newsline) - Attorney General Lori Swanson has announced a settlement with a life insurance company and its affiliate over the sale of deferred annuities to Minnesota senior citizens.
Minnesota seniors, under the settlement, will be allowed to make refund claims against Great American Life Insurance Company and its affiliate, Annuity Investor's Life Insurance Company. The settlement will affect an estimated 2,000 policies with an estimated value of approximately $50 million.
"Many senior citizens face economic difficulty in this troubled economy, and this settlement provides a vehicle for them to obtain refunds," Swanson said.
A refund process will be provided as part of the settlement for seniors who purchased policies from Great American and requires the company to improve its standards of suitability review through an "enhanced suitability review procedure."
Minnesota consumers aged 65 or older who purchased a deferred annuity between January 1, 2001 and August 1, 2008 will receive a letter from both the attorney general and Great American to inform them of the settlement and their opportunity to submit a claim for a full refund without penalties.
Annuities purchased after August 1, 2008 by consumers who feel aggrieved can also have complaints filed. Those refund requests will be "liberally construed" in favor of the consumer.
Great American will offer consumers a refund of their premium without surrender charges or penalties if it is determined that Great American's deferred annuity sale was unsuitable or based on misrepresentations. The refund will also have 4.15 percent interest compounded annually.
The settlement also allows for a Great American to request and obtain additional information from consumers when necessary to make a suitability determination. That additional information will include whether or not the consumer has sufficient liquid assets and disposable income to pay for ongoing living expenses and emergencies without access to all of the money that would be paid into the deferred annuity.
Great American will also be allowed to conduct a manual "elevated review" of annuity applications for consumers 65 years or older who have liquid assets of less than or equal to $75,000, have an annual income of less than or equal to $20,000 or anticipates a significant increase in living expenses or a significant reduction in net income or liquid assets during the annuity's deferral or surrender charge period.
Great AMerican will issue the policy if an annuity application is subject to elevated review only if specific, objective evidence is determined and documented to clearly establish that the sale is suitable for the consumer in light of his or her stated financial condition, needs and objectives.