NBC’s Chris Hansen Investigates Annuity Sales to Seniors

NBC’s Chris Hansen conducted an undercover investigation focused on the predatory sales tactics used in the sale of equity-indexed annuities to senior citizens.

Watch the video below or read the transcript to,

  • go behind the scenes to uncover the sales tactics insurance agents use
  • inside free-dinner seminars to catch the questionable pitches
  • inside training sessions to reveal insurance agents being taught to scare seniors and puff their credential with deceptive books, magazines and radio shows

Prominent in the program is Annuity University which trains insurance agents. Annuity University has been sued for running a dishonest scheme to deceive, coerce, and frighten the elderly. Read more about Annuity University in this Wall Street Journal article.

Minnesota Attorney General Lori Swanson, who reviewed NBC’s footage, and who has filed several suits alleging fraud in the sale of annuities to seniors, tells Hansen: “…what is tragic about it is when those agents go into the seniors’ homes, it is literally the wolf among the lambs.”

“Treat’em like blind 12-year olds”
Commentary: Annuities are a suckers bet

Complex Annuities See Surging Sales ~ Investors Should Beware

An “indexed annuity” is a complex, high-cost, and illiquid financial product. They pay interest based on the performance of stock and bond market indexes.  Insurers guarantee buyers will not lose their principal, but they require investors to lock-up their capital for long periods, often more than a decade.

Indexed annuities are very popular with insurance salespeople because they are a high commission product.  Insurance agents can get an up-front payoff of 12% or more of the invested amount simply by making the sale.  The accompanying chart demonstrates the sales of indexed annuities have surged in the past decade.

Investor protection agencies and authorities are very concerned about abuse and fraudulent activity around annuities sales.  Former California insurance commissioner Steve Pozner warned that agents “who steal from vulnerable seniors will not get away with their shameful tricks.” 

Equity-Indexed Annuities? Roll your own…

Considering equity-indexed annuities? Roll your own to get similar advantages and skip the downsides. Instead of a $10,000 annuity, you could put $7,260 into a 3.25% 10-year certificate of deposit from Discover Bank and $2,740 into Vanguard Total Stock Market.

Downsides of Equity-Index Annuities

Considering equity-indexed annuities? Perhaps think again. Downsides include heavy front-end fees (5%-8%) for the salesperson, an upside cap that is adjustable at the insurance company’s discretion and you generally can’t acess your money for 10 years.

Downside Protection Has Downsides - WSJ.com

Downside Protection Has Downsides http://online.wsj.comFixed-indexed insurance products, commonly called “equity-indexed annuities,” offer the promise of protection on the downside combined with a guaranteed minimum upside. They racked up a record $8.2 billion in new sales in the second quarter and hit an all-time high of $168 billion in total assets…
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