Annuity Scams Rob Elderly of their Golden Years: Allianz Insurance Fined $10 Million for Scamming Seniors
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Annuity Scams Rob Elderly of their Golden Years: Allianz Insurance Fined $10 Million for Scamming Seniors

Tuesday, July 08, 2008By Richard Alexander

Recently, you probably have received emails from a former Nigerian Counsel offering to split $100 million with you, if only you provided him with all of your personal information and kept the communication confidential. An obvious scam.

A much more effective and more lucrative scam is to have a licensed Insurance Agent sell a real Insurance Annuity Contract to a person of advanced age, robbing them of their life savings--while the agent pockets a hefty commission and the insurance company reaps the financial huge benefits by never having to pay-off.

These contracts are designed to prey on vulnerable seniors who believe their Insurance Company would do them no harm.The scam simply robs seniors and their heirs of their life savings.

Recently, you may have missed the $10 million Allianz Insurance Company was forced to pay in fines to the California Department of Insurance for bilking seniors.An investigation by the Department of Insurance found that the Company had routinely sold annuity policies to seniors 85 years and older, effectively bilking them of their life savings.

Allianz has been forced to pay fines in other states as well.But the victims of this crime rarely report it and rarely recover their own losses.Embarrassed they did not understand the terms of the contract after being pressured into signing it, many victims never come forward.

Allianz is not the only company doing this, just the most visible to date.The problem is so prevalent the legislature set up a special fund for District Attorney's to use to prosecute these crimes.The Life and Annuity Consumer Protection fund was created to incentivize District Attorneys to investigate and prosecute this "nonviolent" crime.The program is paid for by tacking on an extra dollar to every annuity contract sold in the state, which then goes to a special fund.

In addition to the fines, Allianz as part of a settlement, must conduct a review of all those who were 65 years and older when they bought their contract. Allianz must contact all those who are 76 years and older to make sure they understand their contract. Allianz must amend their contract to make them more understandable. Allianz must clearly point out the terms of bonuses being offered to their sale force and when they are paid. Allianz must allow seniors impacted by their fraudulent techniques to request cancellation of their contracts.

These are not options, but mandates that Allianz must fulfill as a result of their conduct.

Allianz got off easy.

Their profits more than compensate for their outrageous, deceptive and corrupt behavior. Companies like this should not be fined, but shut down.Confiscate their book of business and distribute it to honest carriers.

Seniors and their families need to be the first line of defense.The best way to protect consumers is through education and following some simple rules when buying an annuity contract.

Annuity contracts are never simple.They are challenging documents that must be read and understood.Seniors should never tie up money that they may need.Food, housing, medicines should never be sacrificed for a promise to pay tomorrow.

Here is some important advice.

First, never sign anything you don't understand.

Second, insist that a trusted friend or family member be with you during any presentation or signing.

Third, never sign anything in front of an agent, make them leave the documents with you and allow yourself time to read and think about the product.If it is a good deal today, it will be a good deal tomorrow.

Obtain full disclosures of all surrender penalties and make sure everything is done in writing.

Finally, and most importantly, never believe that an Insurance Agent or Company is on your side.They are paid for selling products.If there is no sale, there is no commission.

For the most part, annuity contracts are bad deals for those of advanced age.The numbers simply don't work out, and too often the victim and their heirs pay a hefty price.

If you find yourself a victim of this practice, report it immediately.See an attorney, who is paid to fight for you and doesn't get paid unless you collect.

In the final analysis, it is your money.Insurance companies doing what Allianz has done are one step removed from the ex-Nigerian Counsel who has been sending you email.

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Richard Alexander

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