Insurance Law
Suits Target Annuity Pitches
Posted Aug 8, 2007, 09:36 am CST
By Debra Cassens Weiss
More than a dozen federal lawsuits claim insurers are misleading elderly consumers with sales pitches for equity-indexed annuities that track the stock market.
The largest case is a class action on behalf of 400,000 consumers who bought annuities from Allianz Life Insurance Co. of North America, the Wall Street Journal (sub. req.) reports. The St. Louis-based 8th U.S. Circuit Court of Appeals upheld class action status in the case last month.
Consumers who buy equity-indexed annuities pay a lump sum or make payments during a deferral period that is often five or six years long. The companies guarantee a minimum return based on an equity index such as the Standard & Poor’s 500. When the deferral period is up, the consumer can collect a lump sum or choose a series of payments.
Critics claim the products don’t benefit older people since they bar access to money for several years. The Allianz case targets up-front bonuses promised to new purchasers. The company says the bonus is immediate because customers can start earning interest on the bonus right away; plaintiffs say the consumer can’t access the money for several years.