Hundreds of older Minnesotans will be able to make refund claims involving approximately 2,000 insurance policies with an estimated value of about $50 million as part of a settlement reached with the policies' seller.
Minnesota Attorney General Lori Swanson said today the settlement has been reached with Great American Life Insurance Co. and its affiliate, Annuity Investor's Life Insurance Co., ("Great American") regarding the sale of deferred annuities to Minnesota senior citizens.
The settlement is modeled after previous settlements the attorney general reached with:
1) Allianz Life Insurance Co. of North America in October 2007,
2) American Equity Investment Life Insurance Co. in February 2008,
3) AmerUs Life Insurance Co. and American Investors Life Insurance Co., now part of the Aviva Corp., in October 2008, and
4) Midland National Life Insurance Co.in December 2008.
The settlement provides for a refund process for seniors who purchased policies from the companies, and requires the companies to improve their standards of suitability review through an "enhanced suitability review procedure."
"Many senior citizens face economic difficulty in this troubled economy, and this settlement provides a vehicle for them to obtain refunds," Swanson said.
The settlement includes these terms:
Refund Process. Minnesota consumers who were age 65 or older and purchased a deferred annuity from Great American between January 1, 2001 and Aug. 1, 2008, will receive a letter from the Attorney General and Great American informing them of the settlement and their opportunity to submit a claim for a full refund, without penalties. Consumers who purchased annuities after August 1, 2008 who feel aggrieved may also file complaints with the Attorney General's Office. Refund requests will be "liberally construed" in favor of the consumer. If it is determined that an Great American deferred annuity sale was unsuitable or based on misrepresentations, Great American will offer the consumer a refund of their premium, without surrender charges or penalties, plus 4.15 percent interest compounded annually.
Suitability Review of Future Annuity Sales. As part of the application process for future annuity sales, Great American will request and obtain additional information from consumers that is necessary to make a suitability determination. The additional information includes whether the consumer has sufficient liquid assets and disposable income to pay for ongoing living expenses and emergencies without access to all of the money that would be paid into the deferred annuity. Specific information to be requested by Great American include the senior's:
* Percentage of liquid assets placed into the annuity
* Anticipated significant changes in household monthly income, living expenses, or liquid assets, such as a reduction in income caused by retirement or pension changes or by an increase in expenses such as housing, medical, nursing home, or assisted living expenses.
As part of Great American's enhanced suitability review procedure, the company will also conduct a manual "elevated review" of annuity applications if a consumer is 65 years of age or older and:
1. has liquid assets, after purchase of the annuity, of less than or equal to $75,000; or
2. anticipates a significant increase in living expenses or a significant reduction in net income or liquid assets during the annuity's deferral or surrender charge period, whichever is longer; or
3. has an annual income of less than or equal to $20,000; or
4. the premium to be paid into the annuity exceeds 25 percent of the consumer's net worth (excluding the consumer's home); or
5. the premium to be paid into the annuity is greater than four times the consumer's annual income.
If an annuity application is subject to elevated review, Great American will issue the policy only if it determines and documents specific, objective evidence clearly establishing that the sale is suitable for the consumer in light of his or her stated financial condition, needs, and objectives.
The settlement was approved today to Ramsey County District Court Judge Michael Monahan.
Individuals with questions about the settlement, or who wish to file a consumer complaint, may contact the Minnesota Attorney General's Office by calling 1-800-657-3787 or 651-296-3353.
Consumers may also download a Complaint Form from the Attorney General's website at www.ag.state.mn.us and return the completed form to the Attorney General's Office at: 1400 Bremer Tower, 445 Minnesota St., St. Paul, MN 55101-2131.