Unmitigated Commission Chargebacks

[Viverrid]

Just wanted to get some feedback from annuity and life guys. Has anyone experienced a commission chargeback from an annuity that was sold more than 2 years ago?

An alarming trend is emerging whereby an annuity carrier, frightened by negative press of the last couple of years, is rescinding annuity contracts that are as much as 5-6 years in to their contracts and charging the agent back for all commissions, even on money that was withdrawn.

Do any other agents have a voice on this?

 

[patch36]

It depends who you are, how much you are producing, and how bad they want to keep you as an agent.

I KNOW AVIVA/AMERUS did it to an agent I know personally. The agent was charged back over 15k in commission on one policy they rolled over on. The agent had everything documented and did nothing wrong, the annuity was 3 years old, and they decided to not fight the case.

I have heard of others from this same company, but this is the only one I know the facts on. This is and a few other reasons is why I don't write for them any longer.

Just wanted to get some feedback from annuity and life guys. Has anyone experienced a commission chargeback from an annuity that was sold more than 2 years ago?

An alarming trend is emerging whereby an annuity carrier, frightened by negative press of the last couple of years, is rescinding annuity contracts that are as much as 5-6 years in to their contracts and charging the agent back for all commissions, even on money that was withdrawn.

Do any other agents have a voice on this?

 

[Crabcake Johnny]

I know an agent friend of mine currently is being sued for just over $40K in annuity chargebacks. He was captive when selling, then left. The court case has been going on now for over a year.

 

[Todd King]

I'm astonished to hear this! I was thinking this was a little like the bigfoot story when I first started to read, but then Patch and John both say they know of agents personally this has happened to. The only thing Patch, that I find weird, is that your friend decided not to fight this. Obviously this was soley the company's decision since the free look period was wayyyyy over. How can they do this legally? Somethings fishy there...did he possibly misrepresent it?

 

[somarco]

Haven't heard of it but it does not surprise me. Annuities get a lot of bad press, some of it, perhaps even most of it, deserved.

That's the problem in dealing with (mostly) the senior market. All they have to do is claim they have been wronged and the sale is reversed.

It doesn't matter if you did everything above board. It is easier for the carrier to cave and unwind everything vs. fighting it.

That's just one reason why I don't work with senior market products.

 

[Crabcake Johnny]

In my friend's case, after he left apparently some of his clients claimed the annuities were misrepresented - Suntrust decided to side with the clients and he wasn't even contacted for his side of the story.

Since he was no longer working for Suntrust he simply received a bill for over $40K in charged back commission. He refused to pay claiming he did absolutely nothing wrong - Suntrust sued.

 

[somarco]

soley the company's decision since the free look period was wayyyyy over. How can they do this legally? Somethings fishy there...did he possibly misrepresent it?

The free look isn't a free pass.

Carriers are under a lot of pressure on all fronts. Look at the rescissions on health policies (mostly) in CA and what happened. In some cases the carriers fought the challenge but often they rollover and reinstate the policy.

It is economics.

As for the annuity reversal, the way deferred annuities are priced there is a long tail . . . up to 15 years in some cases. In addition to early term penalties there are MVA's which can affect the value of the annuity years after it is sold.

When an annuity is reversed it almost always costs the carrier money. They are simply seeking to recoup their losses any way they can and the agent is an "easy" pick.

I bet if you read your contract you will see they have the right to recoup commissions long after the free look period. And it doesn't matter if you did everything right or not.

 

[Crabcake Johnny]

The carriers also know something else - you don't have the time or money to sue them. This is how you can be locked into contracts when it's most often nowhere to be found in print.

 

[Todd King]

I did take a look at the contract...It's written in the favor of the company of course. There is nothing definative on a time frame except they say that if it's done in the free look period you have 5 days to return the commission. As for any time other than the free look period they give no specifics except they will charge you back....wow!!

 

[Crabcake Johnny]

Anytime someone claims fraud is involved there's never a time frame. They could charge you back 10 years after writing the annuity.

Same language in health contracts - two years to review a claim...except for fraud. If the carrier can prove fraud apparently they can rescind at any time in the future.