PRINCETON – A measure sponsored by Senator John H. Adler which would provide consumers with the tools necessary to protect themselves from deceptive practices by dishonest insurance brokers and financial planners was signed into law today by Governor Corzine. The public bill signing took place at AARP’s New Jersey State Office in Princeton.
“‘Get-rich-quick’ schemes have been around since the beginning of time, but this law will send a clear message that we will not allow the much-needed finances of our seniors to be compromised,” said Senator Adler, D-Cherry Hill. “The idea for this legislation came to me one morning while I was sitting in my kitchen, reading the paper. As legislators, we have to be able to anticipate problems like these before they become crises – I wish officials in Washington would do the same thing.”
Senator Adler’s bill, S-1165, amends and supplements previous insurance producer and unfair trade practices statutes to provide consumers with several protections from unethical business practices by “insurance producers” – agents, brokers and financial consultants.
The bill prohibits insurance producers from using any certification or title on business cards or marketing materials that is not specifically issued or recognized by State regulators. Insurance producers will only be allowed to obtain education credit towards licensing or licensing renewal from courses of study that are approved by the Commissioner of Banking and Insurance.
“These brokers give themselves titles like ‘certified senior advisor,’ or ‘certified elder planning specialist,’ and then turn around and sell seniors annuities that they don’t need, simply because the commissions on those annuities are higher than on other investments,” said Senator Adler
The new law also provides two new tools for consumers to use in determining if an investment product is financially sound. First, insurance producers will be required to provide a one-page suitability form that outlines the terms and conditions of any annuity they offer a client. Second, purchasers of annuities will have a 10-day rescission period to further review, get a second opinion or change their mind and get a refund if they decide the annuity is not in their best interest.
“It’s easy to make a mistake when the terms of an annuity are not spelled out – and even then it’s best to get a second opinion,” said Senator Adler. “When it comes to serious financial decisions, people need to have an opportunity to change their minds if they find out they’ve been sold a bill of goods.”
The law also establishes legal grounds for any person wronged by a violation of the law to follow against the insurance producer, and if applicable, the insurance company as well.
“In extreme situations where investors are being unfairly targeted, brokers and companies should both be held liable. If they’re both guilty, they will both be prosecuted to the fullest extent of the law,” said Senator Adler.
This bill was unanimously approved by the Senate on June 23, 2008.