It seems as though almost every issue of the insurance trade press covers new legislative and regulatory initiatives to “protect” seniors from financial fraud and abuse by unscrupulous salespeople.
Prevention of fraud and abuse against anyone merits applause. But it seems suspicious to select any one group as needing greater “protection” than is afforded to the general public. This is particularly true regarding availability of insurance, annuities and other financial products.
The need to “protect” seniors seems to stem from a belief that all seniors suffer from an age-induced inability to comprehend and deal with the technical elements of complex financial products. Such generalization is inappropriate and wrong.
It is a sad fact that many Americans suffer from financial “illiteracy.” This is not limited to seniors. It has been reported that the average American cannot calculate a 15% tip on a bill for lunch, let alone understand complex financial relationships contained in something like a variable annuity. The problem seems to stem from inadequacies in the educational system, not just the mendacity of the purveyors of financial products.
To single out seniors for extra protection is insulting, particularly when the entire population is equally inadequately prepared to understand complex financial products.
Everyone wants the easy road to financial security. Seniors are often somewhat more concerned because of their shorter time horizons and a greater awareness of their own mortality. Yet, seniors are also perhaps in greater need of quality financial products as a direct result of these shorter time horizons.
To restrict arbitrarily the ability of seniors to obtain the financial products they may desperately need to achieve their financial goals does not do them a service. Information, not limitation, is the solution.
A number of initiatives appear intended to “protect” seniors from unscrupulous sellers of insurance policies and annuities. These range from outright prohibitions against sales to seniors to disclosures that are more likely to frighten and dissuade seniors from purchasing what may be essential financial products than they are to promote an informed decision.
We do not believe these “protections” are appropriate. They tend to lead to a “one size fits all” solution to complex financial concerns, rather than to an educated consumer making an informed decision.
These “protections” for seniors particularly are pronounced when it comes to VAs. No financial product in history has been as replete with such overwhelming amounts of government dictated “disclosure.” Could it be that VA prospectuses and other sales materials (all carefully reviewed and monitored by various regulatory bodies) do not provide meaningful or even adequate information for making informed decisions?
VA prospectuses can run on for dozens of pages, full of legal rhetoric written by lawyers for lawyers. Entire forests have been eliminated to provide the paper for these legal tomes, which no one reads or could understand if they were to read them.
These complex legal documents are, for the most part, virtually worthless for seniors–or anyone–to use in making informed decisions about needing an annuity or whether a particular annuity is right for the need.
Instead, purchasers rely on sales materials or commissioned salespeople to obtain the necessary information. Moreover, these decisions involve relationships that can last for decades; indeed, a purchaser may be “locked in” to a contract for many years because of adverse tax consequences or surrender penalties. There is little doubt that annuities and other complex financial products have been sold in circumstances that were inappropriate. Yet the “knee-jerk” reaction of regulators and the press to such abuses is to restrict access to products where there is the chance of abuse, instead of addressing the real issue.
People need annuities to plan for their retirement. This is particularly true for seniors. To restrict arbitrarily the ability of older citizens to obtain annuities insults seniors and obscures the fact that everyone who purchases a financial product needs to understand better what is being purchased.
The bottom line is, seniors are not feeble minded. As a group, they do not lack the ability to understand complex products. They have the same needs for access to products as does the rest of the population, regardless of age. And everyone, not just seniors, needs protection against fraud and unscrupulous business people.
One group should not be generalized merely because of age. Instead, provide better and more understandable information so everyone can make informed decisions.