ARIZONA STATE SENATE
Phoenix, Arizona
REVISED
insurance; rental cars
(NOW: annuity contracts; free look)
Exempts
supplemental annuity contracts relating to deferred annuities from the return
and refund provisions outlined in current statute.
Background
An annuity is a contract, usually sold by an insurance company that makes periodic payments to the holder at a future date, usually beginning at retirement. A fixed annuity pays a guaranteed rate and guarantees principal. A variable annuity produces investment returns based on the performance of the investments made through the annuity. An immediate annuity begins making payments right away, rather than several years from now. A deferred annuity makes payments at a point in the future for a defined period of time. In Arizona, when consumers purchase annuity contracts, they have the right to ask for factual information regarding their annuity and for a refund of their investment for a limited period of time following the disclosure of their return of the annuity. This is known as a “free look” period.
One rare type of annuity
contract involves a contract to purchase – which is subject to the “free look”
– and a distinct contract for disbursement which, it is argued, is not. These annuities treat the disbursement
portion of the contract as an extension to the deferred annuity purchase
contract. Typically, in these cases,
the disbursement contract is never offered to the general public, but only to
individuals who complete the investment portion of the contract and the pay-out
portion is treated as a separate contract that focuses on the terms of the
annual payments. If, as some may suggest,
the second disbursement portion of the contract were subject to the first look
provision, then individuals selling these types of annuities would be at a
disadvantage. And it may be argued that
the consumers of the state are harmed by not having a full range of investment
options available to them.
This measure exempts the
disbursement portions of deferred annuity contracts (or as supplemental
contracts to deferred annuity contracts) from the part of the provision
regarding the return and refund rights.
There is no anticipated
fiscal impact to the state general fund associated with this legislation.
1. Exempts the annuity contracts that are issued supplemental to a deferred annuity contract from annuity return and refund requirements.
2. Provides for a general effective date.
Amendments Adopted by Committee
· The strike everything amendment was adopted.
Senate Action
BI 3/14/02 DPA/SE 5-0-1-0
3rd Read 3/27/02 28-2-0-0
Prepared by Senate Staff
April 5, 2002