Allianz Life Misled Seniors on Deferred Annuities

Allianz misled seniors on annuities

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Since 2000, Allianz has sold more than 4,900 deferred annuities, worth about $260 million, to Minnesotans over the age of 70.

When a 73-year-old man contemplated using his life savings to buy a deferred annuity policy from Allianz Life Insurance Co. in 2001, he asked his agent what would happen if he needed some of the money to pay his wife's medical bills. The agent told him to buy an Allianz Flex-Dex Bonus annuity and assured him that the product was flexible enough to accommodate his needs. So the man used the $40,000 he had tucked away to do exactly that.

But when he tried to dip into those funds to pay the medical bills he knew were coming, he was told he'd have to pay a whopping surrender charge of $6,000 because the annuity hadn't matured.

Attorney General Lori Swanson sued Golden Valley-based Allianz, accusing the company of violating Minnesota law by offering and selling annuities to senior citizens that were unsuitable for their financial needs. Swanson said her office had been investigating Allianz Life for some time and had attempted to settle with the company.

The attorney general's suit, filed in Hennepin County District Court, alleges that Allianz didn't adequately disclose to seniors purchasing the deferred annuities that their money could be tied up for as long as 15 years, that they could not cash in their annuities early without paying a hefty penalty, and that payments advertised as immediate bonuses also were not payable for up to 15 years. The suit claims Allianz failed to properly supervise the sales of such products and paid agents lucrative commissions to sell them.

This is something that AARP is very interested in - protecting investors, especially older consumers who are frequently the primary victims of this kind of fraud.

Deferred annuities are investment products designed to provide income over a period of years. The investor doesn't begin receiving payments until after a certain period of time, called a maturity date.

But Allianz isn't the only company accused of preying on seniors. In 2004, the attorney general of California and that state's insurance commissioner sued a group of companies, one in Des Moines, Iowa, and two in California, for allegedly tricking retirees into investing their retirement money in annuities.

In 2005, New Jersey regulators put into place the Senior Citizen Investment Protection Act, which limits how long insurance companies can charge surrender fees on annuities. Also in 2005, Charlotte, N.C.-based Bank of America, under pressure by the Massachusetts secretary of state, agreed to give consumers 78 or older the chance to get out of their annuities penalty free. (Read More About Allianz Deferred Annuities)