An annuity issuer is battling with a Minnesota official over the official’s allegations that the annuity issuer tied up older consumers’ savings for too long a period.
Minnesota Attorney General Lori Swanson has filed a suit against American Equity Investment Life Insurance Company, a unit of American Equity Investment Life Holding Company, West Des Moines, Iowa, in a state court in Hennepin County, Minn.
Swanson estimates American Equity sold about $46 million in long-term annuities from 2000 through 2006 to 1,200 Minnesota residents who were over 75 years of age at the time of purchase.
The annuities locked up the older purchasers’ savings for 10 to 16 years, and some of the annuities imposed a 25% surrender charge during early contract years, Swanson says in a statement about the Hennepin County suit.
“It was not uncommon for the insurance company to tie up over 50% of the senior citizen’s net worth,” Swanson says.
In the Hennepin County suit, Swanson has accused American Equity of violating state insurance suitability law and state laws dealing with fraud, false advertising and deceptive trade practices. The suit seeks restitution, injunctive relief and civil penalties.
Swanson filed a similar suit against another annuity issuer, Allianz Life Insurance Company of North America, Minneapolis, in January.
In January, the Attorney General’s Office filed a lawsuit against Allianz Life Insurance Company of North America over similar practices..
American Equity has put out a statement of its own reporting that the company had cooperated with the attorney general’s requests for information but was denied any opportunity to discuss its products or sales practices with Swanson’s office before the suit was filed.
“We strongly believe the allegations of the attorney general are without merit,” American Equity says in its statement. “American Equity has a strong market conduct record in the state of Minnesota.”
No type of savings strategy is appropriate for all purchasers, but American Equity’s deferred annuities can be an excellent choice for consumers seeking a safe alternative for a portion of their savings, the company says.
American Equity has worked with Iowa and Minnesota insurance regulators to develop annuity sales suitability standards, and it was one of the first annuity writers to implement suitability reviews of annuity sales, American Equity says.
All products that American Equity sold to older Minnesota consumers were approved by the Minnesota Department of Commerce, and contract provisions expand withdrawal rights when annuity holders enter nursing homes or become terminally ill, the company says.