State insurance regulators are seeking input by Oct. 8, 2010 on a draft model bulletin on stranger-originated annuities. The transactions which were first identified in Rhode Island created a storm of interest that resulted in a hearing in Washington, D.C., this past May.
Commissioners at the National Association of Insurance Commissioners, Kansas City, Mo., maintained that there are tools regulators currently have available to address any abuses in the sale of annuities to senior citizens. But they agreed that a bulletin would be an effective and speedy way to address the issue.
The draft, based on an Ohio STOA alert encourages insurers to “put safeguards in place to prevent or limit their exposure to stranger-originated annuity transactions.”
The draft bulletin states that “As the financial implications of stranger-originated annuity transactions could be detrimental to both companies and consumers, it is suggested that companies:
Review chargeback policies to ensure agent commissions are adjusted if a policy is annuitized within the first year of the contract.
Create detection methods to identify agents who may be involved in the facilitation of stranger-originated annuity transactions.
Review all annuity applications to ensure specific questions are posed with regard to an annuitant’s health status and the manner in which the contract is being funded.
Ensure the underwriting department has red flags established so questionable applications are referred for additional review.
Report potential stranger-originated annuity transactions to the appropriate Department of Insurance.”