Dateline and Equity-Indexed Annuities

Chris Hansen from Dateline NBC devoted an entire hour on April 13, 2008 to the topic of equity-indexed annuities and the unscrupulous tactics sometimes used to sell them to seniors.

(Recognize Hansen’s name? He’s best known for his work on the Dateline NBC television segment To Catch a Predator. These controversial investigations revolved around catching Internet sex predators using a sting operation.)

This week’s segment, titled Tricks of the Trade, used a hidden-camera investigation to see what insurance agents say — and what they don’t — when they think they are alone with a senior. The show promised, “Join us in a ground-breaking hidden-camera investigation, as we go behind the scenes to uncover the techniques they use: inside sales meetings — where we catch the questionable pitches; inside training sessions — where we discover agents being taught to scare seniors; and, finally, inside senior’s homes to reveal the tricks some agents use to puff their credentials to make a sale.”

If you would like to see related articles and follow-up from the show, you can watch the segment online, read on the official transcripts, or visit some of their recommended links:

• Allianz statement to Dateline
• National Association of Fixed Annuities
• Minnesota’s Attorney General, Lori Swanson

My First-Hand Experience with Equity-Indexed Annuities

Interestingly, my very first Money Guy podcast covered this exact topic. I based the discussion on an article in the December 14, 2005 Wall Street Journal titled, Why Big Insurers Are Staying Away From This Year’s Hot Investment Product.I’ve also had experience dealing with individuals who have been sold unsuitable products.

In today’s show, I revisit the Wall Street Journal article, discuss my impressions of Dateline NBC’s recent investigation, and share my experience dealing with the fallout from inappropriately sold equity-indexed annuities.

Postscript: In today’s show, I mentioned a widow who came to me after investing all of her liquid assets into equity-indexed annuities. Since many of you have asked, I’m pleased to report that there was an unexpected but happy ending. Most states provide a small window of time after an insurance contract is issued for the purchaser to change their mind. This individual fortunately came to me during this period and we were able to undo the damage.

If we’d missed that window, I would have first recommended that she contact the corporate office of the insurance company that issued the product. Then, I would have suggested engaging a lawyer and filing a complaint with the state insurance regulator.

Note: Please know I’m not trying to pick on insurance agents. I’m a big fan of insurance and always recommend dealing with a reputable agent as part of an overall financial plan. Unfortunately, many agents either don’t understand their products and appropriate uses or don’t care about doing what’s right for their client.

My advice? Find a local agent you trust, check their credentials and references, ask specifically how they get paid, and challenge their advice with informed questions. Checking prices with an online service can also be helpful, but I prefer to do business with a real agent. In an emergency, you’ll find this can make a big difference.

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