The State of Minnesota has settled a lawsuit with Allianz Life Insurance Co. involving annuities. Some seniors who might have died before they could get their annuity money back from the insurance company now can apply for refunds and interest under the settlement.
Minnesota Attorney General Lori Swanson accused Allianz of selling annuities that weren't appropriate for older retirees. Many of them claimed they had been told they could get their money out, only to be forced to choose between onerous penalties or leaving their money in the annuity for years. Allianz, which also agreed to pay $500,000 in fines and expenses, is the nation's largest seller of these types of annuities. The settlement has already been approved by a state court judge.
Folks who are over 65 and who bought Allianz deferred annuities after January 1, 2001, can apply for a full refund without penalties. More than 7,000 annuity holders with $325 million worth of annuities are expected to get letters outlining the refund process.
Annuity holders will have four months to apply for refunds. Allianz and the attorney general's office will decide jointly whether to grant the refund, but the settlement calls for them to "liberally construe" the facts in favor of the consumer.
They will look for evidence that the annuity "was unsuitable on the date of application or that Allianz or its agent misrepresented the terms or conditions" of the annuity. A third party will settle disputes over who should get refunds. The Attorney General's office is also investigating other companies over similar practices. Golden Valley, Minnesota-based Allianz Life is a subsidiary of German insurer Allianz SE.
Allianz agreed to give closer scrutiny to annuities being sold to people over age 65. Annuity applicants who will be left with less than $75,000 in liquid assets after they buy the annuity, or those with annual incomes of less than $20,000, will get extra scrutiny before they are allowed to buy the annuity. The new procedures are expected to result in Allianz rejecting "substantially more policies" than it does now. In discussing the lawsuit, the Attorney General observed:
These financial instruments are incredibly complicated. We have lawyers in the office who struggled to understand them. They're written in small print. They're extraordinarily complex. I believe they're intentionally designed to be complex. And that can lead to abuse, as well.