by John Darer CLU ChFC CSSC RSP CLTC
New York State residents may be targeted by companies purportedly selling annuities, but who are really selling structured settlement payment rights which are NOT annuities.
Consider that real annuities sold to or for the benefit of New York State residents have statutory protections that are designed to protect consumers to make sure consumers/investors in annuities know what they are buying.
Regulation 187 (Part 224 of Title 11 of the Official Compilation of the State of New York) requires insurers set forth standards and procedures for recommendations to consumers with respect to annuity contracts so that the insurance needs and financial objectives of the consumers are appropriately addressed. This part applies to any recommendation to purchase or replace an annuity contract made on or after June 30, 2011.These standards and procedures are substantially similar to the NAIC Suitability in Annuity Transactions Model Regulation.
Section 224.4 (g) & (h) holds the insurance company responsible for ensuring that every producer recommending its annuity products is adequately trained to make the recommendation, however, the regulation does not require the completion of specific training classes.
The companies that sell and assign structured settlement payment rights to you, are not licensed to sell these products, because there is no such licensing requirement at the moment. Many of them are not registered to do business with the secretary of state in the states where they are soliciting consumers and investors, including New York State residents. They operate the way they do because they are not subject to these laws, or aren't they?
Is there a potential compliance issue for New York licensed structured annuity issuers who are put on notice that a structured settlement purchaser is using their trademark name and logo to market payment rights from the New York admitted insurance company, with the implication that these vehicles are annuities issued by such company, and the company fails to act? In my opinion there is plenty of reason for consumers and investors to be confused. You have companies market a product with a higher risk profile than an annuity, calling that product an annuity and you may have insurance companies who are put on notice about their names and trademarks being used, who do little or nothing to counter the misleading advertising.
Are companies that market structured settlement payment rights as annuities misleading consumers and investors, creating a false impression that the staff of these companies are, in the case of targeted New Yorkers, licensed insurance producers? What legal rights to consumers and investors have against these false advertisers?
When you purchase structured settlement payment rights, the ones that certain companies are marketing as annuities, you are being assigned the rights to future periodic payments that someone else has sold. While the transfer of those rights can only be obtained by a valid court order, the existence of such order is no absolute guarantee that the order cannot be vacated in the future. I am personally aware of a case in Florida in which an order was vacated, prior to a legal complaint being filed after the best interest of the seller was called into question. The game has changed however as now there are two pending lawsuits, one brought by a New York resident and the other by several residents of states that could be the start of a trend. In each of these cases multiple transactions were approved in a very short period of time, in each instances subjecting the seller to additional fees. Annuity issuers charge fees ranging from $500-$3000 per structured settlement factoring transactioin