by Structured Settlement Watchdog
Following several posts concerning advertisement of unrealistic "guaranteed rate of return at approximately 15%" for structured attorney fees by a Buffalo based structured settlement firm AND, having given the Buffalo based firm a reasonable opportunity to respond (over 18 months! since first post!) , this author contacted the New York State Insurance Department for guidance. It's the goal of this author to establish a best practices guide for sales and solicitation of structured settlement annuities.
The same firm referred to an "equivocated guaranteed rate at approximately 15%", whatever that word salad means.
New York Insurance Department Response of September 24, 2007
Download ny_insurance_department_920207_response_to_inquiry_about_structured_attorney_fee_rate_of_return.pdf from Supervising Attorney Michael Campanelli of the New York State Insurance Department in response to 3 questions posed concerning representations made by Brokers/ Agents in the sale of structured settlement annuities.
The Questions
- Must an agent or broker substantiate a claimed rate of return on life insurance or annuites?
- May an agent/broker continue to advertise a rate of return that is unattainable?
- Does the evidence presented indicate that the described conduct constitutes any violation of the New York Insurance Law?
The Conclusions
- Although there exists no affirmative requirement that an agent or broker substantiate a claimed rate of return, the Insurance law prohibits the making of misleading statements or misrepresentations regarding life insurance and annuities.
- If the rate of return claimed is unlikely, unrealistic or unattainable, the continued advertisement of such rate would constitute a prohibited misrepresentation and would reflect negatively on the trustworthiness of the licensee.
- The evidence presented has been referred to the Department's Consumer Services Bureau for further investigation. The Department will not characterize the conduct pending the outcome of the investigation.
New York Regulations Concerning Insurance Advertising (includes annuities)
NY Ins. Law Sec 2123 (a)(1) (McKinney 2006)
11 NYCRR Sec 219.1 et seq. (Regulations 34-A) sets forth rules governing advertisements of life insurance and annuity contracts. It is aimed at preventing the dissemination of misleading or deceptive information to the public.
According to 11 NYCRR Sec 219.13 an advertisement shall include, but not necessarily be limited to the following, when designed to be used or are actually, to induce the public to purchase, increase, modify, reinstate or retain a policy:
(i) Printed and Published Material, audio visual material and descriptive literatire of an insurer sued indirect mail, newspapers, magazines, radio scripts, televison scripts, billboards and similar displays
(ii)descriptive literature and sales aids of all types, including but not limited to circulars, leaflets, booklets, depictions, illustrations and form eltters, issued by an insurer, agent, broiker, solictor or organization sponsoring the insurance for presenattion to members of the insurance buying public.
(iii)prepared sales talks, presentations and material for use with public by agents, brokers and solictors.
The standard for determining whether and advertisement is misleading or deceptive also is set forth in the regulation at 11 NYCRR Sec 219.4 (a)(3) (2006):
"Whether an advertisement has the tendency or capacity to mislead or decieve shall be determined by the superintendent from the overall impression that the advertisement may be reasonably expected to create upon a person not knowledgeable in insurance matters".
Sec. 2123 also prohibits misrepresenting the benefits of any policy or contracts
Webster's dictionary defines the word "approximate" as (1) "Approaching; proximate; nearly resembling; (2)Near correctness; nearly exact; not perfectly accurate; as, approximate results or values (3)those which are nearly, but not, equal. Doesn't leave much wiggle room does it? In other words if a number like 8% were it to be realistic, it could not be considered "approximately 15%".
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