Annuity Sales Supervision Advisory Committee Reviews Proposed Regulations

23 July 2008 Publication
Authors: Kevin G. Fitzgerald

Legal News Alert: Insurance

On July 21, 2008, the Annuity Sales Supervision Advisory Committee (Committee) reviewed a draft of proposed regulations that would provide further supervision regarding the sale of annuities to Wisconsin residents. Once finalized, the proposed regulations will be submitted to State of Wisconsin Commissioner of Insurance Sean Dilweg for further action. Although the drafted regulations are still under Committee review and subject to change, sources indicate that these new regulations are aimed at preventing abusive annuity sales techniques and   allowing for additional data gathering regarding Wisconsin annuitants.

With respect to protecting Wisconsin residents from questionable annuity sales tactics, the proposed measures include:

  • Increasing training requirements for agents
  • Establishing procedures to allow companies to identify agents involved in suspicious sales more readily
  • Requesting that the Wisconsin State Legislature increase criminal penalties for certain fraudulent annuity sales practices such as forging signatures
  • Having independent reviewers interview annuitants age 70 and over to determine whether such annuitants understood their purchases
  • Prohibiting the sale of annuities to persons age 70 or older where such annuities include a 10-year (or more) waiting period for withdrawals and a 10 percent (or more) penalty for early withdrawal

The drafted regulations also include measures aimed at gathering information regarding Wisconsin annuitants. The proposed measures require that, at the conclusion of each annuity sale, the annuitant provide information regarding their income and expenses, disposable income, assets (including investment and life insurance holdings), liquidity, overall risk tolerance, and the source of the funds used to purchase the annuity. Such measures also would require that annuitants age 75 and older be asked whether they receive independent financial advice, and whether they anticipate changes in their living circumstances (i.e., relocation to a nursing home/assisted living facility) in the near future. All such information would be collected and analyzed both on an individual level, to review whether the transaction was appropriate, and on a statewide level, to understand emerging trends better.

The Committee was created in August 2007 in response to more than 500 complaints received by the Wisconsin Office of the Commissioner of Insurance during 2006 and 2007 regarding annuity sales. In 2006 alone, $5 billion worth of annuities was sold to Wisconsin residents — more than half of which was sold to individuals in their 60s, who are frequent targets of sales abuse. Comprising state officials, industry representatives, and other interested parties, the Committee’s goal is to formalize regulations establishing the minimum supervisory requirements that annuity writers need to meet in order to sell annuity products in Wisconsin. The Committee’s Web site, available at http://oci.wi.gov/advcoun/anncomm.htm, contains updated information regarding the Committee’s activities as well as downloadable copies of related materials.


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Authors and editors:

Kevin G. Fitzgerald
Milwaukee, Wisconsin
414.297.5841
kfitzgerald@foley.com

Benjamin S. Thomas
Milwaukee, Wisconsin
414.319.7329
bthomas@foley.com

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