Consumer Stories

Tin Htway

Tin Htway of Woodland Hills, California was victimized by a classic annuity sales abuse – having his perfectly good Allianz annuity “flipped” to a new Americo annuity that was totally unsuitable for him but generated fat commissions for the agents who sold him the Americo annuity.  Tin’s wife passed when Tin was eighty-two.  Although his wife’s Allianz annuity permitted Tin to continue his wife’s annuity under the Spousal Continuation Benefit, the agents told him that he could not continue the Allianz annuity.  They convinced him to terminate the Allianz annuity and put the money from the Allianz annuity ($182,533.12) into the Americo annuity. The agents, who had sold Tin’s wife the Allianz annuity only two years before, earned new commissions when the Allianz annuity was flipped to the Americo annuity, while Tin had to pay new front-end loads and was now saddled with surrender charges for the next ten years.  The agents also misrepresented the terms of the Allianz annuity’s death benefit (the “Enhanced Withdrawal Benefit”) of over $37,000 – another benefit that Tin lost when the Allianz annuity was flipped to the Americo annuity.   “I wanted to keep the Allianz annuity, but they told me I couldn’t, and they also did not disclose that the Allianz annuity had a death benefit that was payable.  They took advantage of an old man who had just lost his wife,” said Tin, “They are just crooks.”


Irma Bajar and Christina Schauf

Irma and Christina, a married couple from Oakland, California, were tricked into buying indexed universal life policies that they did not need or want and that caused them to lose $13,000.  A woman they had thought of as a friend told them that she was in training to start her own business and asked them to sit in on a practice presentation with her trainer.  Irma and Christina did not realize that the presentation was in fact designed to sell them life insurance policies.

The “friend” and her trainer were life insurance agents who convinced them that they were way behind in their retirement planning and that they should invest money in life insurance policies to build a nest egg and get tax-free income in retirement.  The agents even convinced Irma and Christina to divert money from their 401K plans at work into indexed universal life insurance policies from Transamerica.  When Irma and Christina questioned how high the planned premiums were ($430 per month for Irma and $400 per month for Christina), the agents repeatedly assured them that they could reduce the premiums at any time.  This was technically true, but it was misleading because reducing the premiums would doom the policies to lapse because the fees and charges on the policies were so high that high premiums were needed to keep the policies in force.

Irma and Christina felt pressured into buying the policies, which were extremely complicated and never clearly explained to them. Transamerica pressured them further by deducting the first premium payments from their checking accounts even before the policies were delivered to Irma and Christina.  They thought that no money would be deducted before they had accepted the policies, but Transamerica deducted the money before Irma and Christina had ever seen the policies, let alone accepted them.  In Christina’s case, Transamerica deducted the money even before it issued her policy on March 8, 2021.

Irma and Christina found that they could not afford the monthly payments, so they approached the agents in July 2022 about reducing the premiums.  The agents told them that doing so would cause the policies to lapse.  Irma and Christina requested to cancel the policies and get their money back, but their requests were refused.

In July 2022, they stopped paying into their policies, which lapsed after fees and charges consumed the cash surrender value of their policies.  They lost all the money they had invested in the policies — $6,880 in Irma’s case and $6,400 in Christina’s case, for a total of $13,280.  Said Tina, “We never would have bought these policies if we had understood them.”  Added Irma, “They flat out tricked us out of many thousands of dollars.”


Torbjorn and Ann Millang

Torbjorn and Ann Millang of Laguna Beach, California feel they were conned into buying an indexed universal life policy by a life insurance agent who used her position as a “friend”  to convince them that a Pacific Life indexed universal life policy was a good way to save for retirement and earn tax-free income.  They did not need or want life insurance but were convinced by the agent that the policy was a good investment.  In several very confusing discussions, they were shown illustrations based on their investing $1,833 per month for the first 12 years and then nothing after that.  The illustrations showed the policy being credited with 6.26% interest each and every year, enabling them to take $524,000 in tax free withdrawals and loans during retirement while still retaining a small tax-free death benefit.

Although the illustration included great detail about the crediting rates, it made no disclosure of the many fees and charges applicable to the policy, and neither did the agent.  Soon after they bought the policy in 2021, the Millangs were surprised to discover the true costs of the policy:  from each monthly premium of $1,833, 5.9% was immediately deducted as a premium load, and $669 was deducted each month for cost of insurance and other charges. They went back to the agent and worked out a reduced monthly premium of $1,041, but that did nothing to reduce the charges (other than reducing the dollar amount of the 5.9% premium load), so they abandoned the policy in 2022 and lost all the money they had paid in ($9,664).   Said Ann,  “We feel we were victims of a predatory scheme by the insurer and the agent; we were tricked into buying an incredibly expensive policy that did nothing for us except take our money.”


Kim Howlett

Kim Howlett of San Diego bought an indexed universal life insurance policy from Life Insurance Company of the Southwest.  Kim was impressed by the agent’s sales pitch that he could invest money in the policy and then obtain tax free income to fund his retirement.  As agents often do, Kim’s agent suggested that the policy be heavily funded up front.  Kim planned to invest $105,750 per year into the policy for the first four years (totaling $423,000) and then put in no more money after that.  Kim’s illustration showed him investing the $423,000 during the first four years, paying no money after that, and then drawing income of $122,797 every year beginning in year 17 and continuing to year 36, and at that point Kim’s policy would still have a cash value of $159,495.  This all looked great to Kim, so he bought the policy.  Kim later learned that the agent received a commission of $67,592 out of Kim’s first year premium of $105,750.  Kim says that if he had known about the commission at the time he was considering buying the policy, it “would have made me a lot more suspicious of the whole deal and where the money was coming from to pay the commission, which was obviously from me.”  Kim ultimately lost his entire $105,750 investment, as fees consumed his policy until it ran out of money and lapsed about three years after he bought it.


Sherry Abrams and John Lewis

Sherry Abrams and her husband John Lewis of San Francisco, CA each bought universal life policies in the mid-2000’s, as each wanted to make sure that the other would have financial security if they died before their spouse. They bought universal life policies from New York Life and Massachusetts Mutual that were touted as “permanent” life insurance, which, unlike term insurance, would cover them for the rest of their lives and have the added benefit of enabling them to accumulate cash in the policy to help support them in their retirement.  But the policies turned out to be anything but permanent because the rising costs of maintaining the policies will soon consume all the accumulated policy value and cause the policies to lapse.  For example, although John has faithfully paid his premiums of $300 every month since 2008, cost of insurance charges now exceed $300 per month and will continue to rise so that his policy will lapse in a few years unless he pours in more money to offset the rising charges.  Sherry faces a similar situation with her universal life policy from Massachusetts Mutual.  Said Sherry, “The insurance agents that sold us these policies were either dishonest or incompetent.  They told us that the policies were permanent, and the brochures gave the same impression.  But they never told us that “permanent” means permanent so long as you keep paying more money whenever the insurance company says you need to pay more — regardless of the premium amount was set at the beginning of the policy.  We are now facing losing all the money we have paid in over the years and not having any life insurance coverage as we reach our later years (77 and 80 years old).”