What is Annuity Fraud?

Annuity fraud occurs when an unscrupulous insurance agent convinces you to buy an annuity product that you don’t need or is unsuitable for you. Annuities are profitable products for insurance companies to sell, but they are not always the best investment for all individuals and families. Senior citizens are the most vulnerable targets of unprincipled agents who prey upon their fears and misrepresent the value of annuities. Hallmarks of annuity fraud include high-pressure sales tactics, misleading representations about the agent’s professional status, false promises of bonuses, and undisclosed or hidden fees.

What is an annuity?

An annuity is a form of insurance related to life insurance, but instead of paying benefits to your beneficiary after your death, it pays benefits to you during your lifetime. Annuity payments can begin as soon as you purchase the annuity, but most often people purchase deferred annuities, where payments do not start until a number of years after the annuity is bought. Deferred annuities are therefore sold as investments to provide a steady stream of income for retired people.

How do you know if an annuity is a scam or not?

There is nothing inherently wrong about buying an annuity in principle, and some people rely on annuities as safe financial products that provide a reliable return on their investment. The fraud occurs in the way the annuity is presented – or misrepresented – to unsophisticated or elderly buyers who do not fully understand the terms of the contract and are misled about what they are getting. The following are some key indicators of annuity fraud.

High-pressure sales tactics – Annuities are profit centers for insurance companies, and agents who are looking to maximize their commissions or who are put under pressure from the company to sell annuities prey on seniors and unsophisticated investors by pressuring them into buying annuities when they are not suitable investments given the investor’s needs.
Annuities are marketed to seniors as safe investments, but they may require the investor to pay a large amount upfront and only get a little back at a lower rate of return than they could have obtained through another investment. While, in general, higher returns equals higher risk, some annuities do not outperform other products with a similar level of risk that would be a better buy for the consumer.

An annuity locks up your money for years. If you are already elderly when purchasing an annuity, that money could be unavailable to you at a time when you sorely need it. Make sure you understand when the annuity will start making payments. In many cases, insurance companies sell annuities that don’t start making payments until the annuitants are in their 90s, or even much later. Planning for your future is essential, but an annuity might not be a suitable instrument for your needs.

Misrepresentations – Consumers might not even know they are dealing with insurance agents or buying an insurance product. Sellers of annuities present themselves as financial advisors, consultants, or financial planners, lending an air of trust. Professional investment advisors are licensed by the state and have fiduciary duties and responsibilities to their clients. You can check online with the applicable state regulatory agency to see if the person you are dealing with is really licensed or not.

Twisting and churning – If you already have an annuity, the agent might try to convince you to trade it in for a new annuity from the same company or a different company. Every sale racks up a commission for the agent, but you are stuck paying surrender fees, extra premiums, and possibly losing value in the long run. Similarly, a company might offer to buy up your annuity for cash. This puts you right back where you started, but likely having lost money overall and paying extra transaction fees.

Signs that you may be purchasing (or have purchased) an unfair annuity

• Promises of a bonus premium for signing a contract, but you never see that money when receiving annuity payments
• High-pressure sales tactics that offer products “today-only” or for a limited time
• Maintenance fees and withdrawal fees that were never disclosed when you purchased the product
• The agent uses a misleading professional title to appear as a licensed investment advisor or other professional
• The billing address for your premium payment goes to a post office box that doesn’t seem related to the insurance company
• The agent tries to sell a revocable living trust with the annuity without involving a licensed attorney in the process

Protect Your Life Savings and Call a California Annuity Fraud Attorney for Help

You might be approached for an annuity by some company you’ve never heard of, or it might be one of the biggest and most trusted names in the insurance industry. Determining whether you purchased an unfair annuity is a complicated matter. If you think your annuity is not performing the way it was promised to you, call an experienced insurance attorney who has successfully filed multiple unfair annuities class actions and individual cases in the courts. Insurance plaintiff’s lawyers typically provide free consultations and operate on a contingency fee basis, so it doesn’t cost you any money out-of-pocket to talk to them or have them pursue a claim for you.