The Hartford Raising Red Flags Over Variable Annuity
New York insurance regulators are joining ranks with Connecticut’s insurance commissioner to determine if The Hartford made improper disclosures or misled clients regarding a new variable annuity product. The story was first reported by Investment News on Sept. 12.
According to the article, the Iowa Insurance Division also is watching the situation and waiting to see what actions, if any, that Connecticut and the Financial Industry Regulatory Authority (FINRA) might take.
Meanwhile, attorneys for some investors are forecasting legal troubles for The Hartford Financial Services Group over letters that the company sent to clients on Aug. 23.
The letters allegedly include statements designed to get clients to swap out their variable annuities for an updated product, called the Personal Retirement Manager.
“This letter leaves out material information that reasonable investors would want to know to consider whether this [VA exchange] is viable for them,” said Steven B. Caruso, a resident partner at Maddox Hargett & Caruso PC, in the Investment News article. “This is a half-baked solicitation that’s designed to spur action [by clients].”
Caruso says the letter also raises questions as to whether The Hartford is violating FINRA’s Rule 2330, which includes disclosure and suitability requirements.
“FINRA’s rules require them to have a customer-specific basis for a suitability determination,” Caruso said in the article. “If they sent this to everyone, it’s clear that it’s not customer-specific.”
New York’s Regulation 60 requires proposed life insurance and annuity replacements to provide critical information, including surrender charges and projected returns, which would allow clients to compare products.
Reportedly, The Hartford’s letter fails to include information on the length of the surrender period for the new annuity, as well as fee information and the key fact that investors could very well lose the guaranteed living benefits that they had with their previous variable annuity.