Allianz Life Insurance settles California annuities complaint
The company promises to stop targeting the elderly with pitches for unsuitable products.
SACRAMENTO — Taking what they described as a significant step to protect senior citizens, state regulators have persuaded the biggest seller of annuities in California to promise to stop targeting the elderly with pitches allegedly designed to sell them pricey policies that could never pay off.
The agreement between Allianz Life Insurance Co. of North America and the Department of Insurance requires the company to set up an internal review system to make sure sales agents do not pressure senior citizens into buying investment vehicles that cannot meet their needs.
Allianz, which admitted no guilt in signing the agreement, also will pay $10.05 million in penalties and special assessments.
"The fact that Allianz used deceptive practices and high-pressure sales tactics to lure and cajole seniors into buying unsuitable policies is appalling," California Insurance Commissioner Steve Poizner said in a statement.
Annuities are contracts that promise people who pay an upfront sum that they can depend on regular streams of future income. According to a complaint Poizner filed against Allianz in 2006, the company's annuities often didn't deliver.
From January 2004 to July 2005, Allianz deceptively persuaded 126 customers, ages 84 and 85, to replace existing annuities purchased from other companies with Allianz policies that were less valuable, the complaint said.
In all, 97% of all replacement annuities that Allianz sold during that time period turned out to be financially unsuitable, the complaint said.
In one case cited in the complaint, Nora H., 85, was persuaded by an agent to swap an annuity from another insurer that paid 3.25% in annual interest for an Allianz policy paying 1.5%. She had to pay a $7,500 surrender charge to the original insurer and faced a $12,500 penalty from Allianz if she decided to surrender the new policy, the complaint said.
"Her cash value will never recover," it said.
The complaint also accused Allianz of using deceptive marketing materials that promised "immediate" bonuses to customers even though purchasers would not begin to get any of the money for at least five years.
Such delays were particularly egregious for annuitants in their mid-80s because they faced an estimated 50% chance of dying before they reached 90, the insurance department said.
Minneapolis-based Allianz said it shared Poizner's goal that "consumers purchase only those products that meet their financial needs and objectives."
