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Two Aviva USA Units Settle With Minnesota Over Unsuitable Sales of Annuities to Seniors(BestWire Services Via Acquire Media NewsEdge) Two subsidiaries of Aviva USA, the top seller of equity-indexed annuities in the United States, settled a lawsuit brought by Minnesota's attorney general, who alleged they sold the deferred type of these annuities to senior citizens that weren't suitable for their financial needs. The settlement with AmerUs Life Insurance Co. and American Investors Life Insurance Co. allows seniors in the state to make refund claims involving about 4,500 policies with an estimated value of about $250 million, according to Minnesota Attorney General Lori Swanson. The companies also agreed to pay the state $375,000. The deal, approved in Hennepin County District Court, is based on previous settlements the attorney general reached with Allianz Life Insurance Company of North America and American Equity Investment Life Insurance Co. Deferred annuities, Swanson's office said, are complex financial products and may lock up an investor?s funds for more than 15 years, and may include surrender charges of up to 20% of the investment if a senior needs to access his/her money before the surrender period ends. In some cases, the surrender period may be longer than a senior's life expectancy. Minnesota consumers who were age 65 or older and bought a deferred annuity from the two Aviva USA companies from Jan. 1, 2001 on can submit a claim for a full refund, without penalties. If the companies' sale of the annuity wasn't suitable or based on misrepresentations, they must offer a refund of their premium, without surrender charges or penalties, plus 4.15% interest compounded annually. Aviva/AmerUs "has stepped up to do the right thing," Swanson said in a statement. "I appreciate the company?s willingness to resolve these important issues for senior citizens, especially in these very trying economic times." For future annuity sales, the companies must ask and obtain more information from seniors on their application to determine if the annuity is suitable. This information includes whether the senior 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. In a statement, Aviva USA said the settlement puts the issue behind them and they can focus on developing long-term savings products. "We believe the vast majority of products we have sold are suitable; therefore, we anticipate that this agreement will not have a material impact on the company," Aviva USA said. "Less than 1% of Aviva USA?s customers have complained to the company about its products." The attorney general said she's now settled with the top three sellers of equity-indexed deferred annuities in the United States, allowing seniors to make claims for refunds on about 15,000 policies with a total estimated value of $700 million. A suit against Midland National Life Insurance Co., the fourth-biggest seller of these annuities, remains pending in the Hennepin County court, Swanson said. (By Fran Matso Lysiak, senior associate editor, BestWeek: [email protected]) Copyright ? 2008 A.M. Best Company, Inc. |