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Insurance firm fined over sales to seniors
(Register-Guard, The (Eugene, OR) Via Acquire Media NewsEdge) Oct. 31--State officials have fined a life insurance company that does business in Eugene $150,000 and ordered it to refund money to some of the senior citizens to whom it sold annuities. It also was 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 that were inappropriate and took most or all of their money, 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.
"A lot of these people didn't know they were buying annuities," Martinis said. In at least one case, she said, the buyer had dementia.
Some buyers had long-term care policies from the company and were responding to solicitations about ways to lower their medical costs, she said. Instead, they were sold annuities. "They didn't understand what they had."
Annuities are insurance contracts that require either one up-front payment, or a series of payments, and provide the purchaser with future income. Annuities may include high up-front costs and penalties for early withdrawal.
Of 30 annuities that the state deemed questionable, "at least half were in Eugene," Martinis said. An employee at the Eugene office of the company referred calls to the company's headquarters in the Midwest, which had closed for the day. Bankers Life also has offices in Portland and Medford.
A Corvallis couple said they sank their life savings -- more than $1 million -- into annuities over a period of several years. The couple, who asked not to be named, cashed out individual retirement accounts and other funds, at a cost of $27,000, to buy the annuities, after being told they were safe.
"We had long-term care policies with them," the husband said in an interview Thursday. "An agent came out and said, 'You've had a nice run-up in the stock market. Don't you want to safeguard your money?
Nobody's ever lost money in an annuity.'"
The couple wasn't given a prospectus or details of the annuity plans in writing until after they had signed up, he said, but, "We were trusting souls. ... We'd invested for years; we had always dealt with people who had been up-front and honest."
Around the end of last year, the couple realized they were in trouble, he said. They concluded that the best they could hope for, if the stock market had a good year, was a 2 percent return on their investment. In a bad year, they would get nothing, he said. Even in a good year, he said, "Inflation would have wiped us out."
But they thought there was nothing they could do. "We figured we were going to have to eat it," the husband said, and live on annual withdrawals from a small IRA.
But then they were contacted by state officials, and "we had a long interview with the investigator," he said. The company has now refunded $1.2 million of the couple's money, and they are hopeful they will get the rest -- several hundred thousand dollars.
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."
Bankers Life has sold 3,400 annuities in Oregon since January 2005, when the state put stronger rules in place, Martinis said.
In the future, the company will need to document that it has researched a client's age, financial situation and insurance objectives well enough to know whether the client can afford the annuity and whether it is appropriate for the client's needs, according to the state's order.
This week's action by regulators was the result of an 18-month investigation sparked by a complaint from an attorney whose client had bought one of the annuities, Martinis said.
The Consumer and Business Services Department had previously taken action against two Bankers Life agents in Eugene for what the state said were unsuitable sales. "(Eugene) was a hotbed of activities," Martinis said.
One agent surrendered her license in lieu of enforcement after the department found she failed to research a client's financial situation before recommending an annuity, a statement from the department said.
The other agent was fined $2,000 for recommending that a client incur unnecessary state and federal taxes by cashing in three annuities with Bankers -- in order to buy a new annuity from the company -- even though the client could have kept the original annuities.
To see more of The Register-Guard, Eugene, Ore., or to subscribe to the newspaper, go to http://www.registerguard.com.
Copyright (c) 2008, The Register-Guard, Eugene, Ore.
Distributed by McClatchy-Tribune Information Services.
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