Insurance companies which sold annuities with guaranteed returns at 7% two years ago have stopped selling the same annuities now. They have also stopped allowing contributions to the existing annuities that they guaranteed would have that return of return when they sold those annuities two years ago. They are reportedly sending form-letter notices that they are no longer accepting contributions to those accounts. See Paul Sullivan, "Wealth Matters / A Guaranteed Return On an Annuity Has Limits After All" p. B5, col. 1 (New York Times Nat'l ed., "Personal Business" Section, Saturday, September 15, 2012).
Putting aside all questions surrounding whether these insurance companies can do this, and the substantive methods they are pursuing to do it, there is a separate question of the kind of 'notice' they are providing to the annuity-holders. Anecdotal evidence is provided in the linked newspaper report, and it is the only evidence we have at the moment. Whether it is representative or not, time will tell.
One annuity holder quoted only as "Steve" in the article received a "form letter" in August of this year. The nondescript envelope looked like junk mail. It was taped shut and bore the word, "Presorted". Inside, "Steve" found "a piece of paper folded in threes". He only read it, he says, because his broker forewarned him to read it because the insurance company that issued Steve's annuity previously announced that it was not going to allow people like Steve to contribute any more money to their annuities. (It was one of several insurance companies that announced this position.)
The quality of this 'notice' left something to be desired in Steve's judgment. He is an advertising copywriter. "This is not the way you talk to your audience unless you want to make sure that they completely don't understand it, and you don't want them to open it. I know because I'm in advertising, and I create inclusions like this for companies like Prudential." "Steve" last name not provided, quoted by Paul Sullivan, "Wealth Matters / A Guaranteed Return On an Annuity Has Limits After All" p. B5, col. 1 (New York Times Nat'l ed., "Personal Business" Section, Saturday, September 15, 2012). Is this in Good Faith? If it is not Good Faith conduct, and if the conduct is actionable, is it defensible? You have got to wonder. See generally 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH ยง 3:3 "Informing the insured: In general" (3d Edition 2011; 2012 Supplement West Publishing Company).
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