Lawmakers move to protect seniors from annuity scams

Feb 19, 2009

Sarasota Herald Tribune–February 19, 2009


A pair of Southwest Florida lawmakers have teamed with the state’s chief financial officer to introduce legislation aimed at tightening controls on the sale of annuities to seniors.

The bills by state Sen. Mike Bennett, R-Bradenton, and state Rep. Keith Fitzgerald, D-Sarasota, which will be considered in the legislation session that begins in March, would also increase penalties for scams involving annuities.

If the legislation passes, it will raise the penalty for “twisting” — shifting assets from one annuity company to another to generate commissions — to a third-degree felony. It is now a misdemeanor.

Florida Chief Financial Officer Alex Sink says annuity-related complaints to her office have quadrupled since 2005.

Since then, Sink’s Department of Financial Regulation has opened nearly 500 investigations into financial fraud against seniors. Seventy percent of the complaints involve annuities or related insurance products.

“We found that this was a much larger problem than we suspected,” Bennett said Wednesday. “A lot of seniors, we found, are sold inappropriate products for the simple purpose of generating commissions for someone.”

Annuities, investment cocktails made up of insurance policies and stocks, pay out regular allotments over time.

They are attractive to seniors, in particular, because they offer a predictable stream of income. Annuities have become so popular that more than $200 billion worth are sold each year.

But they have drawn fire because payouts are often “deferred,” meaning seniors have to wait years for dividends. Annuities also often contain “surrender charges” of 20 percent or more, fees that cause a freezing of seniors’ assets.

The investments have also garnered criticism because they provide brokers with large commissions — income that Sink and others contend attracts unscrupulous agents.

As Floridians age — nearly three million are 65 and over today and that figure is expected to grow exponentially by 2030 — financial fraud against seniors is becoming an even more pressing issue.

In Southwest Florida alone, seniors have been swindled out of an estimated $350 million since 2000, according to a February 2008 Herald-Tribune story that sparked the formation of ScamBee, a group aimed at helping prevent senior fraud.

Florida Attorney General Bill McCollum will formally kick off Seniors vs. Crime’s Sarasota office today at 2 p.m. at Sarasota’s Senior Friendship Center, after a forum on Internet safety for seniors at the University of South Florida’s Selby Auditorium at 10 a.m. Seniors vs. Crime, sponsored by the attorney general’s office, works with ScamBee.

In September, Sink formed the Safeguard Our Seniors Task Force, a 15-member group, to publicize scams and educate people about them.

The new legislation by Fitzgerald and Bennett would allow seniors to access annuity funds after five years and shrink surrender charges to 5 percent. It also would require brokers who scam seniors to make financial restitution, and extend a “free look” scrutiny period from 14 days to 60 days.

“Better financial protections for our growing population of senior residents and tougher consequences for those who defraud our seniors demand our immediate attention,” Sink said, in unveiling the bill.