Insurance Fraud Through Annuities On The Rise

The sad insurance fraud case of Bonnie Madden is an eye opener. And not just to pensioners but the public in general.

The 82 year-old is the latest victim of insurance scammers. These fraudsters are going around the country conning citizens of their hard earned savings. In her case, an unscrupulous agent used her savings to fraudulently generate $52,000 in commissions.

He used a method called ‘twisting’. The agent inflated Madden’s net worth and took her annuities under a single account with a different insurance company. He did this in order to beef up his earnings from commissions. While the agent was milking abnormally high commissions Madden was struggling to keep up with her premiums.

If it wasn’t for the intervention of Florida state regulators she would have ended up losing Insurance Fraud Through Annuities$300,000 of her life savings. They arrested the rogue agent and got Madden’s money back just in time.

Life Insurance Fraud Through Annuities – Soft Targets

The sad thing is that the Madden story is not an isolated case. There are thousands of other Americans who have been taken advantage of by fraudsters through their life insurance policies. Senior citizens who suffered financially during the 2008 economic crisis make particularly soft targets for these con artists. They disguise themselves as insurance agents bearing good news.

Over just the last three years reports of unscrupulous agents ‘twisting’ elderly Floridians through bogus annuity products have gone up four times. There are currently almost 500 cases of financial crimes against senior citizens under investigation, majority of which involve annuity and life insurance. Which is not to say all agents selling annuities are fraudsters; most of them are hardworking professionals with the best interests of their clients at heart. Only a few bad apples are out there trying to make a quick buck from unsuspecting retirees.

But agents are not the only ones who are culpable. Insurance companies are also guilty of misrepresenting their products to tap into the savings of senior citizens. A few years back the North American branch of Allianz Life Insurance had to pay $10 million after California insurance regulators found the firm guilty of “using false marketing tools” to convince elderly clients to buy unsuitable products. Though they paid the money, the company did not admit to any wrongdoing.

Life Insurance Fraud Through Annuities – Churning

Also senior citizens are buying unsuitable products through ‘churning’. Here the client, usually a pensioner over the age of 80, is convinced to trade in their annuity for immediate bonuses which they eventually never see. It is easy to convince this category of policyholder as they will be looking for a way out of the 15-year waiting time for their annuity to mature without having to incur the massive surrender fees. This form of fraud is not too dissimilar to that of stranger-oriented life insurance, which is even considered legal in some states. Here the victim is the insurance company as the senior citizen buys a life insurance product with the intention of selling it to an investor after the two-year waiting period.


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All info was correct at time of publishing