Florida Legislature Passes Bill on Suitability of Annuities

When the 2008 Florida legislature rejected her proposal to increase criminal penalties for fraud in sales of annuity contracts, Florida Chief Financial Officer Alex Sink created the Safeguard Our Seniors (“SOS”) Task Force to target “unscrupulous [insurance] agents taking advantage of older Floridians by selling them unsuitable and complex annuity investments.”

The just concluded Regular Session of the Florida Legislature appeared to be the third to resist CFO Sink’s crackdown until, in the final hours of the session, it was amended onto SB 2176, an unrelated bill to deregulate certain commercial insurance. The Safeguard Our Seniors Act was approved by Florida Governor Charlie Crist on June 1, 2010, and now appears as Section 45 et seq. of Chapter 2010-175, Laws of Florida. It amends the Florida Insurance Code to increase penalties for sales practice violations and create new consumer protections, including:

• Increase penalties for twisting or churning of annuities from $40,000 to $75,000 and classify these offenses as felonies.
• Limit the period of surrender charges for an annuity sold to a consumer 65 or older to 10 years and limit surrender charges to 10 percent.
• Extend the “free look” period for seniors from 14 days to 21 days.
• Require a cover sheet to annuities explaining the “free look” period and providing other information.
• Expand powers of the Department of Financial Services to order restitution and otherwise. 
• Prohibit insurance agents and members of their families from being the beneficiary of life insurance, serving as a guardian, trustee or having a power of attorney over the insured.