DCBS Media Release
New rule protects consumers from unsuitable insurance products
(Salem) State regulators have acted to help protect Oregon consumers from abusive practices in the sale of life insurance and annuities.
Oregon Department of Consumer and Business Services (DCBS) recently adopted a new administrative rule after the DCBS Insurance Division received complaints about sales of unsuitable life insurance and annuity products, especially to the elderly.
"Most insurers and agents are reputable and make a good faith effort to take a consumer's needs into account," said DCBS Director Cory Streisinger. "But a few bad actors are causing serious damage by pushing unsuitable insurance products on some of our most vulnerable citizens, often resulting in huge surrender charges or unexpected tax consequences."
For example, an unscrupulous agent convinced an 83-year-old Oregon woman to replace her variable annuity with another annuity that had similar features. Her surrender charge was almost $17,000 for the $125,000 transfer.
Under the new rule, which takes effect January 1, 2005, anyone selling or replacing a life insurance or annuity product in Oregon must have reasonable grounds to believe the transaction is not unsuitable for the consumer based on a review of the consumer's insurance objectives, financial situation and needs, age, and other relevant information known to the seller.
Oregon Insurance Administrator Joel Ario said the suitability standard established by the new rule was flexible and result-oriented, giving insurance companies and agents discretion in how they implement it.
"We didn't want to just require insurers and agents to disclose more information to consumers and fill out more paperwork," said Ario, who heads the Insurance Division. "Instead, we want them to focus on the bottom line: making sure they're not recommending insurance products that are unsuitable."