The New York State Department Financial Services has sent life insurers a warning: Issuers have to be as careful about consumer protection when they’re rolling assets from deferred annuities into immediate annuities as they are with other annuity replacement transactions.
The New York department drove that point home today by requiring six insurers to pay a total of $1.1 million in restitution to consumers affected by deferred-annuity-to-immediate-annuity exchanges.
The department will also require the insurers to pay $673,000 in fines, officials said.
The issuer of a deferred annuity takes money in early on, then pays out income years later.
An immediate annuity, or income annuity, typically begins generating a stream of income around the same time it’s purchased.
Consumers who are still working often use deferred annuities to save for retirement. They may use immediate annuities to generate regular income payments after they retire.
Regulators in New York state and other states require insurers to take special care when they’re replacing consumers’ existing annuities, to keep replacement transactions from creating problems for the consumers.
In 2018, the New York department updated its existing annuity sales standards regulation. The updated regulation requires sellers’ life and annuity recommendations to be in the consumers’ best interest.