e and o question

[Tahoe Ray]

I personally have never sold one that applied a surrender charge on a lump sum death claim, but I can definitely see why carriers would have to do that & why a client might consider buying one with it because of the difference in interest rates, etc.

I have not sold one either but understand their place.

Some states, like FL, require a waiver on DB lump sum settlements so the "buy the rate down to get more features" products automatically come with that waiver.

 

[me112233]

Not so easy.

You would have to prove A, and the person who it was explained to is dead. If the agent has documented that they reviewed that part but mom still wanted to buy the policy to get a higher rate (because any product that does that better have great rates) you're toast.

Annuity suitability is rigorously applied at the carrier level in addition to the agent's responsibility. Unless the agent lied on the suitability form or made stuff up, they're probably in the clear.

These products need to be approved by the state. States don't allow products that would lose every lawsuit (which is what you seem to be implying). How would it be suitable for anyone using your example?

You could certainly sue but you'd likely lose.

It's rather easy in most cases. The companies an agent represents are public record in most states. The surrender charge at death is only on some companies' annuity contracts (was a time, that there was no such thing as a surrender charge at death on an annuity contract). Most agents have access to companies that apply a death penalty (surrender charge) on annuities, and companies that don't have a death penalty. We all know that some death-penalty companies offer a waiver of the death penalty, typically at the cost of 25 basis points. There's quite often a higher commission associated with the death penalty annuities; and it can be shown that the agent didn't act in the best interest of the customer in order to chase a higher commission, and lawsuit is likely a winner. Many of these annuities actually pay out LESS than the cash paid in if the person dies in the first 12 months or so. Might have a 6% interest rate, and a 9% surrender charge. I've never seen a death-penalty annuity that couldn't be matched with a no-death-penalty annuity. So why sell them?

I will acknowledge that the lawsuit might not be won, yet why do something so scummy as to sell someone an deferred annuity contract with a death penalty, when there exists plenty of good options that don't have a death penalty? The hassle of a lawsuit, in and of itself, is enough reason to not behave in such a way, even if your moral are deficient to the point that you otherwise don't care.