Midland National to pay $1.3 million settlement

The DOI said that its investigators found numerous instances in which Midland National agents earned commissions by selling unnecessary replacement annuities to senior citizens. In one example, the DOI said, a 75-year-old consumer paid approximately $91,000 to Midland National for one of its annuity products. The annuity had a 14-year surrender period, which meant the consumer could not fully liquidate the annuity without paying a penalty until she was 89 years old. Two years after buying the annuity, the consumer had to surrender it because she needed money to pay her bills after her husband had a stroke and was placed in a board and care facility. As a result, she ended up paying a surrender penalty of approximately $27,500 to Midland National.

The DOI also said that unnecessary replacement of an existing annuity was another practice uncovered by investigators. In another example, an agent replaced an existing higher-interest annuity for an 85-year-old woman with one that left her locked into a lower-earning rate for eight years. Her existing annuity had no surrender charges and guaranteed a 5.5 percent interest. She was sold a Midland National annuity that guaranteed a 4.35 percent interest rate for eight years and three percent in interest thereafter – substantially less than her existing investment. Additionally, the Midland annuity had a surrender charge of 10 percent for five years, grading down to zero after eight years.