Well, I guess Chris Hansen has caught all of the online predators, since now he is doing sting operations on insurance agents. Last night, Dateline aired Tricks Of The Trade, which was billed as an expose on bad insurance agents caught in the act tricking the elderly out of their retirement savings.
The report was centered on a product known as an indexed annuity. It is an insurance product that provides a minimum guaranteed rate of return that is loosely connected to the returns of the stock market. The product has a huge downside; withdraw too much of your money early and face penalties of 15 to 20%. The surrender penalties are based on a 10 year declining schedule. The penalty kicks in if the client withdraws more than 10% in a given year.
Now, let me first say that for years and years I have advised that people not buy these annuity products. These kind of surrender charges are completely absurd. The question though, is can we call this a scam? Can we go so far as to proclaim the insurance agents selling these annuities as con men?
Hansen’s central point was that insurance agents were tricking the elderly into buying these products without informing them of the penalties for early withdrawal. Now, here is what caught my attention; every one of the presentations on the hidden video included the agent mentioning that there were penalties for early surrender. In one case in particular, the agent went through the penalties in detail. In every instance, the agent also provided what appeared to be substantial written information that contained a surrender penalty breakdown.
If I were Chris Hansen, I would have probably packed up my things and considered the whole project a flop. After all, he was not able to prove his central point about people being tricked, and I am sure that we saw only his best edited clips. Every individual was informed about the penalties verbally and provided the details in writing. But this was not in the script. Hansen sat down with various state regulators that watched segments of the hidden video. Hansen grinning ear to ear had the regulators agreeing with his every point. Although the penalties had been mentioned by each agent and provided in writing, Hansen and the regulators agreed that they were not emphasized enough. This really seems like splitting hairs to me and falls enormously short of the promise made at the beginning of the story.
If you know me, you know that I do not like insurance companies and I am the first to criticize them and many of the poor products they are selling today. I am concerned that the media in presenting stories like this are needlessly making people into victims, when they appear to have entered into perfectly legal investment contracts. As it stands now, we have millions of people walking around that claim they were tricked into mortgages they can not afford. While some may legitimately be victims of fraud, most simply assert that they signed all of the documents without reading them! We have to be very careful here to remind people that they are responsible for their own decisions. If you don’t understand something, don’t sign it! Get your attorney to review it, get a second opinion.
Consider the spin on the central victim’s story. A man who reportedly invested $40,000 in an indexed annuity. His wife died and he closed out the annuity early. As a result of the surrender charges, he supposedly lost his home! Now wait a minute here, how could a loss of $6,000 on a $40,000 investment cause someone to lose their home? As this was continually repeated, a picture would come up on the screen of the man and his deceased wife. Please…. I am the only one that saw right through this?
It is one thing to say that these are inferior investment choices, I can agree with that. It is quite another to blame insurance agents for their customers not reading the material provided to them, and not listening to what they are being told.
There are real financial scam artists out there, by putting that label on everyone and anyone in the financial services industry, we are doing society a huge disservice. Mr. Hansen, the only people tricked here were those of us that watched your failed attempt.
For those interested, here is the insurance companies side Click Here
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My main website is www.ChristianMoney.com
James L. Paris
