In 2008, Allianz agreed to pay $10 million to settle allegations that the company sold unsuitable annuities to senior citizens in California. In the same settlement, Allianz agreed to better explain its products to customers. The lawsuit, filed by the California Department of Insurance, named more than 100 senior citizens who traded their existing annuities for Allianz annuities.
According to an article at unitedpolicyholders.org, (February 14, 2008), the California investigation found that Allianz sold 126 policies to people who were 84 or 85 years old and marketed those annuities as having an immediate bonus. However, that bonus did not actually go into effect until at least five years after the policy was purchased, which would have been unsuitable for someone who was 84 or 85 years old.
Furthermore, many critics say annuities are unsuitable investments for senior citizens. In fact, according to the article, approximately 95 of the 126 policies sold as replacement policies to seniors were deemed financially unsuitable for those particular clients.
Under the settlement, Allianz paid a $3 million fine, contributed $3.75 million over five years to a fund to prosecute financial abuse and gave $3 million to an investment network that aids underserved communities. Allianz also agreed to provide seniors with more protection regarding the purchase of annuities.
In 2007, Allianz settled a lawsuit filed by Minnesota Attorney General Lori Swanson, who alleged that the insurance company sold deferred annuities to senior citizens in Minnesota without first determining whether or not the annuities were suitable investments for seniors. The lawsuit further alleged that the annuities, which were marketed and sold to seniors, actually restricted investors' access to the annuities for up to 15 years and misrepresented the terms of the annuity.
The settlement affected approximately 7,000 seniors in Minnesota. As part of the settlement, Allianz agreed to change how it reviews annuity applications for consumers aged 65 or older.
Annuities are investment vehicles that allow the investor to receive a monthly allowance. However, deferred annuities do not start providing payments until a set amount of years after the annuity has been purchased—up to 15 years, in some cases—making them unsuitable for some investors.