The Annuities Protection Bill (Assembly Bill 689) signed by California Governor Jerry Brown on September 21, 2011 is primarily meant to “help protect the hard-earned financial security of Californians, especially seniors, and end an alarming breeding ground for fraud,” according to the bill’s author Assemblyman Bob Blumenfield, D-San Fernando. The bill passed the State Assembly by a 75-0 vote and the Senate by a 34-0 vote. It was also supported by AARP, the Consumer Watchdog, and the California Department of Insurance.
This Annuities Protection Bill, which takes effect on January 1, 2012, “requires insurers to verify that an annuity purchase, exchange or replacement is reasonably ‘suitable’ for the consumer, based on the consumer’s age, income, financial objectives, liquidity needs and other data before recommending the purchase of an annuity to a consumer.”
Many insurance agents victimize seniors by selling them annuities for a large sum of money with the tempting promise of payment of a smaller sum to the insurer over his or her lifetime. Blumenfield added, “Consumers are frequently sold annuities without understanding that their investment funds will be unavailable for years and prohibitively expensive to recover in the short term.” This could be financially devastating especially to those seniors who are on a fixed income.
This legislation will be a sweeping and strong reform to protect consumers from such a financial scam. The California Insurance Commissioner was flooded by almost 2,000 complaints about annuities and life jnsurance from the state’s consumers in the year 2010 when Californians spent $20.7 billion on annuities. This does not take into account the many cases of unreported fraud.
The Insurance Commissioner will have the right to impose fines, revoke the license of an insurance agent, and/or order that lost funds be restored to the consumer when these higher consumer standards are violated.