Georgia Insurance Commissioner Targets Annuity Abuses
November 5, 2006 -
A WSB Radio exclusive report that aired today reveals new state regulations are being issued in an attempt to stop a new wave of investment fraud. This follows months of heated criticism from WSB's two consumer advocates, who have been attacking local insurance agents they have accused of pushing what they call "misleading high-expense and high-commission" investment programs.
WSB's Clark Howard and Mike Kavanagh have been openly critical of the sales of programs known as variable annuities and index annuities. Kavanagh, who is also a local financial planner, says the sales of these products have been targeting older consumers with promises of large market returns with minimum returns being promised of 5% to 7% a year. "The fact is that these products do not provide such actual returns," says Kavanagh, who is also critical of the large penalties people end up paying to get out of these annuity programs when they need to get money.
Responding to the WSB reports, Georgia Insurance Commissioner John Oxendine secretly began an investigation earlier this year into what he now says are numerous cases of "annuity fraud." On the WSB advice show Money Matters on Sunday, Oxendine confirmed that following his agency's investigations, he has issued a new set of regulations to go after insurance agents he says are selling products that are not suitable for many consumers. "You don't go and sell a 20 year annuity to someone who is 70 years old," says Oxendine. "We were finding people selling all types of inappropriate products."
On the Sunday show, Oxendine revealed that his agency's probe included a meeting earlier this year WSB's Mike Kavanagh, who showed the commissioner the problems he was encountering when talking to consumers. Kavanagh told Atlanta's Morning News, None of these cases involved anyone openly breaking the law, but all involved older people being promised things that later turned out not to be in the contract they signed. Scores of consumers told me they had been lied to about guaranteed interest of 7% a year with large market returns - and were stunned to find out both promises nowhere in the products they got."
Oxendine praised WSB's Clark Howard and Mike Kavanagh for their work in exposing annuity fraud. In his phone call to WSB's Money Matters Sunday morning, Oxendine told Mike Kavanagh, "I want to say thank you for you and Clark both. You are the leaders in the fight against annuity fraud. You have been dedicated to the citizens of this state and across the country in the message you've been sending out."
Oxendine says the new regulations will allow his agency to go after agents by revoking their licenses, fine them and shut them down. "It's really a minority of the agents out there doing this," says Oxendine. "But that is why you have have government regulations - to take care of the few people taking advantage of the innocent." The new regulations have been published for insurance agents and insurance companies to review and will go into effect January 1, 2007.
