Prohibited Annuity Practices in Texas: Protecting Seniors

Seniors are particularly vulnerable when it comes to questionable annuity sales practices. Agents in Texas have, according to reports, approached people working in nursing homes and attempted to gather information from residents in an attempt to make a sale. Some agents have been delivering annuity sales presentations in nursing homes that have included misleading information. Because of these reports, the Texas Department of Insurance has introduced legislation and guidelines aiming to crack down on practices that take advantage of seniors.

These include:

A duty to report. The Texas Department of Insurance requires insurers and agents to report any fraudulent insurance acts. According to Insurance Code Chapter 34, agents who report fraudulent activities have immunity from some forms of civil liability.

Penalties. Any agent found to be using deceptive trade strategies, violating truth-in-advertising standards, offering rebates and other prohibited incentives, and fraudulent or dishonest practices will be subject to certain penalties, including license revocation. These actions are also subject to criminal penalties where appropriate.

Some fraudulent practices targeting seniors in the Texas annuity market include:

Questionable surveys and studies. Some agents distribute fictional “surveys” or “studies” to people in the senior market designed to get seniors to disclose personal financial and health information. This information could be used to evaluate, pre-underwrite, and solicit life insurance policies.

Meetings with seniors in the home. Seniors are vulnerable when salespeople meet with them in their own homes. The meeting can be intimidating, and is a common practice of scam artists looking to establish a relationship of coercion and control. Statutes govern this type of meeting, and require specific protocols to ensure the senior’s best interests are put first. The guidelines include reminding the senior of the visit no less than 24 hours prior to the meeting.

Baiting and switching. This involves misrepresenting the subject of a meeting. When contacting a senior and in the senior’s home, an agent should state up front that the purpose of the meeting is to discuss insurance or gather information for a later visit.

Misleading pretext interviews. In initial interviews, fraudulent agents have been found to pretend to be people they are not, pretend to represent a person or organization they do not represent, refuse to identify themselves, and misrepresent the true purpose of the interview. These interviews are illegal, and it is prohibited to use them as a tactic to collect information. Violators may incur both civil and criminal penalties.

Living trust mills. These schemes principally target senior citizens. While the characteristics may vary from scheme to scheme, they all involve misrepresentation of the organization and the salesperson’s true agenda. The introduction may involve a “seminar” that claims to provide unbiased information about living trusts and other estate planning products. The salespeople claim to be experts in estate planning, but are not; they gather information about the prospect’s financial status under false pretenses. Often, the scheme involves building trust and convincing the senior that the salesperson is their estate planner or legal advisor, with their best interests at heart.

The senior market can be vulnerable to a wide variety of scams—and fraudulent annuity sales are just one. To find out more about prohibited annuity sales practices in the state of Texas, check out our insurance CE course on Texas Annuity Training.

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