A team of lawyers says life insurers should make some effort to compare annuity deferral periods with customers life expectancies.
The team, led by William Shernoff of Shernoff Bidart & Darras L.L.P., Claremont, Calif., has filed a suit concerning the deferral period issue in a state court in Los Angeles.
The complaint accuses Midland National Life Insurance Company, West Des Moines, Iowa, of selling annuities with payment schedules calling for payments to start long after the end of the purchasers projected lifespans.
The complaint identifies one annuitant, John Migliaccio, who was 73 in 2003, when he used $42,942.99 that had been in an annuity issued by a unit of Conseco Inc., Carmel, Ind., to buy a flexible-premium deferred annuity from Midland National.
The annuity was scheduled to mature in 2045, and it provided only minimal access to principal for the first 13 years that the annuity contract was in effect unless Migliaccio and his wife, Carmen, paid substantial surrender charges, according to the complaint. Migliaccio died 17 months after buying the annuity.
Midland National has a rule requiring agents to get special permission before selling flexible-premium annuities to applicants over age 70, but it seems to have been granting age exceptions automatically, according to the complaint.
The lawyers who filed the complaint are seeking court permission to represent a class of California residents over age 65 who have bought deferred Midland National annuities with maturity dates beyond the purchasers life expectancies. The class could include about 10,000 Midland National customers, according to the complaint.
The lawyers who filed the complaint are asking for actual, economic and punitive damages, but they have not yet said how much they think the damages will be.
A Midland National spokesman declined to comment on the suit. “Weve just received the complaint, and we havent had a chance to review it,” the spokesman said.
David Woods, CEO of the National Association of Insurance and Financial Advisors, Falls Church, Va., declined to comment specifically about the Midland National case.
But, speaking generally about annuity products, Woods says buying an annuity with flexible withdrawal options that is scheduled to mature long after the purchaser will be dead might make sense for a consumer who wants an annuity but would rather make withdrawals than receive a regular stream of annuity income payments.
“I dont think its particularly significant when the annuity is scheduled to mature,” Woods says.
Reproduced from National Underwriter Edition, January 27, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.