Insurance Agent Fraud on the Rise
By Carole Fleck
Two years ago, at the age of 90, Thomas Pickering of Jacksonville, Fla., was doing the twist. But it wasn't the Chubby Checker variety.
At the behest of his trusted insurance agent, Pickering was buying and selling one annuity after another in a deceitful industry practice called "twisting." That's when dishonest agents persuade clients to cash in one investment for anotheragainst their clients' best interests and for the agents' own financial gain.
In Pickering's case, he followed his agent's advice, sold investments before they matured and lost $11,000 in forfeited interest and penalties. He was about to lose another $35,000 cashing in one annuity to buy anothernetting his agent $20,000 in commissionswhen the company holding the annuity intervened. It suspected Pickering was getting ripped off and called the authorities.
An investigation led Florida's Department of Financial Services (DFS) to revoke agent Peter Waldon's license for fraud.
State insurance regulators say agent fraud is on the rise in states like Florida, Texas and California as unsuspecting consumers fall victim to a host of ploys that go beyond "twisting."
Barry Lanier of Florida's DFS says he's fielding more complaints about greedy agents earning whopping commissions upfront by pitching unsuitable investments like annuities to older people. But Lanier and other experts say some annuities are not considered to be wise investments for most older Americans because they're based on life expectancy, "so when they're sold to people in their 80s or 90s, it may not be suitable."
Growing concern over the sale of annuities to older people prompted the National Association of Insurance Commissioners (NAIC) to adopt regulations that assure that the annuities are suitable to the buyer's needs."This will place responsibility with companies and agents to assure that fraud doesn't happen," Merwin Stewart, chairman of the
NAIC Life Insurance and Annuities Committee, told the AARP Bulletin.
Fraud by agents isn't confined only to annuities. James Quiggle of the Coalition Against Insurance Fraud says consumers should also guard against agents who slip unwanted or unneeded coverage into an insurance policy to increase its worthand the agent's commission.