Despite the conviction and incarceration of California insurance advisor Glenn Neasham for selling an annuity to an 83-year-old client, advisors are unlikely to curtail their annuity sales business, say several observers. Instead, they say the probable outcome is a more thorough suitability review that could take into account a senior’s mental status.
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The Neasham saga has generated a flurry of comments on LifeHealthPro.com and LinkedIn discussions about the case. Most readers express sympathy for the agent, although with the caveat that not all the facts of the case are known. Others questioned the wisdom of selling an annuity to a senior in her 80s. The role of state regulators, the prosecutor, the defense attorney and the carrier were also called into question.
But for advisors and agents working in the field, this case puts even more emphasis on conducting a detailed fact-finding review with senior clients, perhaps even delving into the individual’s medical history.
Said one commentator on LinkedIn, Paul Sebra, CLTC, and a registered rep, “I am curious about two things: Who complained and how was it established that there was a ‘cognitive’ difficulty? Part of my interview process with seniors is to get a list of prescriptions. If Aricept [a drug used to treat mild to moderate cases of dementia] or similar is listed or I suspect an issue, I ask, ‘Who is your Durable Power of Attorney?’ If they do not have one, I suggest that they get one. If they have one, I make sure to include them in the discussions.”
LifeHealthPro reached out to several commentators to get a further take on the potential impact of the Neasham case.
In an interview, David Saltzman, president of EmpowHR, Inc., in Columbia, S.C., acknowledges he is not privy to all the facts in this particular case, although he says “It seems as though the agent did everything he should have.”
Yet Saltzman agrees with Sebra that the case will likely mean a more diligent suitability review when dealing with senior clients due to the possibility of dementia.
“I don’t think for serious practitioners it will have any effect, other than perhaps to refocus them on an issue that is critically important when dealing with clients at all levels and with all product lines which is suitability,” Saltzman says. “I think most professionals I know are very thorough and this will just serve as a warning to delve even further.”
That suitability investigation, he suggests, may include an evaluation of the client’s medical history going forward.
“In the past, states have reviewed, approved or disapproved applications from insurance carriers where medical questions are asked,” Saltzman says. “I’m not aware of an annuity questionnaire that asks the kind of medical questions that you would typically find, for example, on Part Two of a life insurance application. If this is a concern for the state departments of insurance and the states are going to continue to provide oversight in this area, perhaps that is something they ought to discuss and proffer some regulations around.
“That said, if you are selling an annuity to someone of that age, especially in light of this case, it certainly would be a good question to ask,” he continues. “Typically when we think about suitability in the industry, we think about financial suitability or risk suitability or whether it helps a client diversify their portfolio appropriately. In light of this case, if I were selling annuities, I would most certainly make it my business to ask about any medical conditions or drugs that might compromise the applicant’s ability to make a good financial decision. But I don’t know if I would have prior to this case. I would have completed the application as thoroughly and as diligently as possible and if the application didn’t ask medical questions, I might not have inquired previously.”
R. Brian Fechtel, CFA, founder of Breadwinners’ Insurance in Larchmont, N.Y., also spoke to LHP. He terms the case a “travesty of justice” and envisions no hesitancy on the part of advisors to sell annuities. “I think people would look at it and say that is just simply bizarre and so I’m not going to avoid good sales opportunities,” he says. “I don’t think there will be any adverse impact upon people’s initiative in the sales environment because everyone will see this as just an absurd circumstance.”
Yet Fechtel does concede the case raises questions about the underwriting procedures for annuities sold to seniors, as well as the kind of safeguards insurers and agents need to employ. The annuity sold in this instance was an Allianz MasterDex 10.
“There ought to be not just simply a warning about, oh, don’t take advantage of seniors. But there ought to be a protocol if we know, as we do know, that seniors can lose their mental faculties,” Fechtel says. “I’m amazed Allianz doesn’t have an underwriting protocol to protect their agents from possibly making an innocent mistake.”
Allianz spokesperson Sara Thurin Rollin relayed this statement to LHP on the Neasham case via email:
“Allianz Life is aware of the case involving its former California agent, Glenn Neasham, but was not involved in the trial. Because of this, we’re not familiar with the evidence introduced at trial or the evidence in the request for retrial, so we cannot comment on the verdict, the basis of the jury’s decision, nor the basis of the judge’s decision. We know of no other case that resulted in this type of outcome.
The case represents a unique set of facts and circumstances. As we understand the case, it was not about the product, which performed as designed and provided value. Instead, the case was about dementia. Our suitability review process is not intended to touch on health issues or diagnose dementia.
While we do not anticipate that this set of facts and circumstances will ever be duplicated, if an agent has questions about a customer’s state of mind at the time of purchasing an annuity or life insurance, we recommend contacting the carrier or broker-dealer to resolve any issues.
The case reinforces the need for all agents, FMOs and carriers, especially those that do business with senior citizens, to be constantly mindful of the responsibilities to conduct business in compliance with all applicable laws and regulations.”
Tell us what you think of this case. Was the conviction unfair or justified? Will more regulation come about because of the Neasham trial? LifeHealthPro.com and National Underwriter Life & Health will continue to follow this story as it develops.