Comtrack Admin

D. Senior Consumers

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Educational Objective
  • II.C.10. Be able to identify the rules regarding the sale to seniors age 65 and older (CIC 785–789.10): a. Know what types of disclosures are required if the applicant requests an immediate investment of funds in a variable annuity (CIC 10127.10).

As required by the California Insurance Code, every insurer, agent, and broker who solicits insurance to insureds age 65 or older owes those insureds a duty of honesty, good faith, and fair dealing.

Any advertisement designed to generate leads based on a response from a potential insured age 65 or older must prominently disclose that an agent may contact the applicant.

Insurers and agents may not use real or fictitious names that are deceptive or misleading regarding the status, character, or representative capacity of the insurer or agent, or regarding the true purpose of the advertisement. Misleading terminology or advertising materials are likewise prohibited.

If a life agent offers to sell any annuity product to a senior consumer, the agent must advise the senior in writing that selling or liquidating a stock, bond, individual retirement account, certificate of deposit, mutual fund, annuity, or other asset to fund the purchase may have tax consequences, early withdrawal penalties, or other costs, and that the senior or their agent may want to seek independent legal or financial advice before completing the transaction.

Individuals who violate these regulations are subject to the following administrative penalties: $1,000 for a first violation, and $5,000 to $50,000 for a second or subsequent violation. If the Commissioner determines that a licensee's conduct may cause significant harm to seniors, the Commissioner may suspend that producer's license. Insurers who violate these rules face an administrative penalty of $10,000 for a first violation, and $30,000 to $300,000 for each subsequent violation.

1. Disclosures

Every individual annuity delivered or issued to a senior citizen in California must have printed on its front or cover page a notice stating that, after the owner receives the policy, it may be returned for cancellation to the insurer or the agent from whom it was purchased. The notice must clearly state the return period, which must be at least 30 days.

During that 30-day period, premium for a variable annuity may be invested only in fixed-income investments and money-market funds, unless the owner specifically directs that the premium instead be invested in the annuity's mutual funds.

If the owner waives the fixed-income requirement by directing that funds be invested immediately, and then cancels the annuity anyway, the owner is entitled only to the account value as of the date the annuity is returned to the insurer — not the full value the free-look period would otherwise have guaranteed. The insurer must refund the account value within 30 days of being notified that the owner has cancelled the policy.


Key Takeaways
  • Insurers, agents, and brokers owe seniors age 65+ a duty of honesty, good faith, and fair dealing under California law
  • Advertisements targeting seniors must disclose that an agent may make contact, and may never use deceptive or misleading names or terminology
  • Before selling an annuity to a senior, the agent must disclose in writing the potential tax consequences, penalties, or costs of liquidating other assets to fund the purchase, and the senior's right to seek independent advice
  • Violations carry administrative penalties of $1,000 (first) and $5,000–$50,000 (subsequent) for individuals, and $10,000 (first) and $30,000–$300,000 (subsequent) for insurers; the Commissioner may suspend a license for conduct causing significant harm
  • Annuities issued to seniors must disclose a free-look period of at least 30 days; during that period, variable annuity premiums stay in fixed-income/money-market investments unless the owner directs otherwise, and a waived-then-cancelled contract refunds only the account value, within 30 days of notice