Agents Prevail on Legislative Issues

John Kuczwanski, a spokesman for Citizens, said the state-operated insurer is not entirely opposed to the legislation. He added that the training Citizens requires is merely intended to ensure that agents are qualified to sell the company's products. The only perceptible change the legislation would bring is that agents wouldn't receive CE credits for the company's required classes.

The bill also allows agents to complete CE tests via correspondence courses without a proctor. To take advantage of this, an agent need only provide a sworn affidavit stating that he or she didn't receive help with the exam. If the student is an employee of an agency or a corporation, then the student's supervisor, manager, or owner of the agency or the corporate entity must also sign the sworn affidavit. In the case of a student that is self-employed, a sole proprietor, or a partner (or if the exam is administered online), a "disinterested third party" must also sign the sworn affidavit. Johnson said the changes would reduce costs for agents who previously would've had to pay a proctor to oversee the exam.

Predatory Annuity Practices

Another bill affecting insurance agents targeted annuity fraud, and it managed to garner more state attention. The Legislature has already passed this bill, which aims to protect retirees from entering into bad annuity deals. Its primary focus is the practice of inducing consumers to cash in funds from a current investment or an insurance product to purchase another investment product — often referred to as "twisting and churning."

The legislation not only requires that people who are licensed to solicit or sell life insurance complete three hours of continuing education about suitability in annuity transactions, but it also increases the penalties for offenses involving twisting and churning; increases the period of time allowed for an unconditional refund from 10 days to 14 days; enhances regulation of the sale of annuities to senior citizens; and requires an agent to use an approved form when performing a "suitability analysis" relative to recommended investment.

Under the legislation, submitting a fraudulent signature is regarded as a third degree felony. Agents are prohibited from using fake designations to falsely imply financial expertise, and the bill clarifies requirements that agents must meet when selling an annuity to a consumer.

Even though an annuity pays regular, guaranteed dividends, it is not an appropriate investment for everyone. Among other things, agents should not tie up all of customer's money, including emergency cash. The new law will add transparency to the sale of these policies and reduce, but not altogether eliminate, abuses. The bill will also strengthen the civil penalties that the Department of Financial Services (DFS) can charge to those who "twist" the elderly — from $20,000 to $30,000 for a willful violation, and no more than $150,000 for multiple violations (formerly $100,000).

During the past few years, the DFS has witnessed a growing number of cases in which agents have persuaded Florida seniors to purchase life insurance or annuity products that are harmful or financially devastating. During the 2006/2007 fiscal year alone, DFS opened 351 investigations related to annuity transactions, a 41 percent increase from the previous year. Since July 1, 2007, the organization has already opened more than 260 annuity-related investigations, which amounts to a 58 percent cumulative increase since the 2005/2006 fiscal year.

Florida Chief Financial Officer Alex Sink said she was pleased with the bill, though she hoped for tougher consequences for violators.

"This legislation represents a good first step," Sink said. "We were able to increase protections for seniors and punish agents who commit financially devastating crimes. That said, I'm disappointed that we were unable to make it a felony to intentionally deceive a senior in to an inappropriate annuity product. And I'm not going to rest until we're able to put unscrupulous agents that prey on our seniors behind bars."

The annuities bill did earn accolades from the Florida Association of Insurance and Financial Advisors. "We believe the legislature showed great probity in focusing much of this bill on the few bad apples that have taken advantage of consumers," said Bob Lotane, a FAIFA spokesman. "This bill will work to keep the bad guys out."

Lotane added that annuities play a vital role in sound financial planning. He noted that their popularity has grown immensely, but that they are not for everyone.

Sam Miller, executive vice president of the Florida Insurance Council, said the industry lobbied to reduce the scope of the legislation and also to lower the penalties, from felonies to misdemeanors. "The final product reflects reasonable suitability standards, he said. "To the extent that there is a churning of seniors in Florida … this will address that."

"It will help us to better protect this vulnerable population and makes Florida a national leader in efforts to protect consumers from predatory annuity sales practices," said Insurance Commissioner Kevin McCarty in a recent statement. "Selling annuities represents a big business in Florida, and seniors in particular have been victimized in the past by unscrupulous sales tactics."

"I hope this bill sends a shudder down the spines of those who try to deceive and confuse our seniors out of their hard-earned savings," said Senate President Ken Pruitt.

Of Vital Importance

Life insurance bills rarely attract much attention in Tallahassee, but there was at least one notable exception to this rule this year. The House and Senate approved a bill that will create standards for selling personal insurance policies to individuals seeking to insure someone other than themselves. It limits who can have an insurable interest, and in most cases, stipulates that the insured must provide consent in order for the life insurance policy to be written.

Senior citizens are often targeted for such transactions, which are often entered through fraud and pressure by the investor. In this type of scenario, insurable interest laws may be violated, leaving seniors and their beneficiaries vulnerable to unexpected taxes and fees, loss of privacy and other concerns.

The bill stops short of model laws touted by the National Association of Insurance Commissioners. Ostensibly, it will better safeguard senior citizens and others relying on the tax advantages of life insurance policies by revising existing laws that are "completely dated and very full of holes," Lotane said. This bill is expressly intended to clarify current Florida law relating to insurable interests and purchasing life insurance. Florida case law has interpreted Florida law as prohibiting the issuance of a life insurance policy to someone who does not have an insurable interest in the insured. However, statutory and case laws provide little guidance when determining if an insurable interest exists.

"Florida had an abbreviated statute addressing insurable interest," explained Steven Brostoff, a spokesman for the American Council of Life Insurers. "The new law establishes a clearer and stronger definition." According to the new bill, a person may purchase insurance on his or her own life or body for payment to any beneficiary. However, an insurance contract may not be purchased on another person unless the benefits under the insurance are payable to the individual insured, to the insured's personal representatives, or to a person with an "insurable interest" in the life of the insured when the contract began.

The bill defines the various circumstances that constitute an insurable interest for purposes of purchasing an insurance contract. Written consent by the insured is a prerequisite that must be addressed before a contract on the insured can be issued. It is important to note that the signature of the proposed insured on the application for insurance constitutes written consent.