Media Contact: Erin Klug Public Information Officer (602) 364-3471
For Immediate Release April 8, 2008
Arizona Department of Insurance Develops New Consumer Guide
Over the last 3 years, the Arizona Department of Insurance (ADOI) received 259 complaints from insurance consumers regarding annuity sales and investment transactions. While these complaints represent a small percentage of the total number of ADOI complaints, the nature of these complaints offer important lessons for annuity shoppers, especially for seniors. To help Arizona consumers better understand annuities, the ADOI has created a new “Consumer Guide to Annuities for Seniors”.
The majority of ADOI annuity related complaints allege either that the selling agent mishandled or misrepresented the annuity product sold, or that the annuity was unsuitable for the applicant’s needs. Many complainants did not understand that, upon purchase, the annuity would tie up their funds for many years unless they paid a hefty surrender penalty for early withdrawal of their money. In some cases, elderly applicants invested their retirement “nest- egg” without clearly understanding the restrictions and resulting limited access to their funds.
“Annuities are excellent investment options for many people, but it is imperative that people understand that early fund withdrawal from an annuity may result in a loss from the original investment amount,” said Christina Urias, Director of Insurance. “We developed this new consumer guide after hearing from so many seniors who were confused, misunderstood, or were misled about annuity restrictions.”
Informed Decision Making
An annuity is a contract between the purchaser and an insurance company under which the insurer provides income payments (monthly, quarterly, semi-annually, or annually) in return for premiums paid to the insurer. There are several kinds of annuities (fixed, variable, deferred and immediate), each with differing levels of risk to the purchaser. Various resources are available to help annuity shoppers determine what type of annuity, if any, is suitable for their needs.
State law requires insurers to provide certain information early in the purchasing process to give annuity applicants time to make informed decisions. ADOI encourages annuity shoppers to ask the selling agent for these required items: Buyer's Guides, Disclosure Notice and a Policy Summary.
Shoppers can call the ADOI or visit our website to obtain our new Consumer Guide: Annuities for Seniors, as well as Annuity Buyers’ Guides: 602-364-2499 or 800-325-2548 (outside Phoenix) or www.id.state.az.us.