The outrage over Glenn Neasham: a different perspective

March 12, 2012 by Sheryl J. Moore

When you are an independent insurance agent, particularly in today’s day and age of regulation, disclosure, due diligence and scrutiny, you need to expect that you alone are responsible for your actions and the consequences that come with them. This is why I always advise agents to CYA — cover your annuities.

There is no other issue garnering more interest in the insurance industry today than the case of California insurance agent Glenn Neasham. The chatter that I am hearing about this case is angry, scared and very defensive. Why shouldn’t it be?

We are all putting ourselves in Glenn’s shoes and responding how we would want others to, were we convicted. However, there are some blatant facts that are being ignored despite everyone’s outrage. I would like to address these issues.

Before I comment on the case of Mr. Neasham, I’d like to make the disclaimer that I do not know all of the facts of this case. However, no one who has commented on the case does have all of the facts.

I would merely like to offer a different perspective: as a licensed insurance agent, former insurance home office employee, regulatory liaison, pre-law graduate and granddaughter of two Alzheimer’s patients. That being said, I do not endorse any company or financial product, Allianz and their products included. Albeit I am a huge fan of indexed annuities, I am completely independent and serve merely as an insurance expert.

Now, the general overview that we have been provided on Glenn Neasham’s predicament is that:

1. He conducted a proper suitability review in the process of selling an indexed annuity to California resident, Fran Schuber;

2. Mr. Neasham dealt with obstacles in completing the sale of the annuity, as others questioned the health and independence of the prospective annuitant;

3. The policy was issued by Allianz Life without incident;

4. Subsequent to the annuity sale, the Lake County District Attorney began to question the annuity transaction;

5. The annuitant earned approximately $40,000 on the annuity she purchased from Glenn Neasham, despite the fact that it was acquired during the worst recession since WWII;

6. Mr. Neasham was arrested, charged with three separate crimes, found guilty of felony theft, and

7. Neither the home office that issued the annuity, nor industry trade groups, have spoken-out or lent support to Glenn Neasham or his family.

Before I share my own perspective on this case, I would like to say that I have empathy for Glenn Neasham and his family. I am not uncaring, but a realist with some heavy experience in this industry. There are some things that are being disregarded in regards to the case of Glenn Neasham, which are frustrating for me.

We do not know all of the facts of this case

Have any of those reading about this case, or even hearing about it, pulled the court transcripts and read them from cover-to-cover? Unlikely. Without knowing all of the facts of the case, none of us is in a position to provide judgment.

This annuity transaction took place in the state of California

It is a known fact that the state of California is one of the worst insurance departments to deal with. Not only does this state have a history of electing insurance commissioners that hate annuities, are overzealous and politically motivated, but they also have a senior-protection law (SB620) that imposes severe penalties for insurance agents selling “unsuitable” annuities to seniors. This should be a big motivator for all California insurance agents to go the extra mile in their sales efforts.

There was more than one questionable issue that arose in the process of selling the annuity to Ms. Schuber

The prospect’s son disclosed to Mr. Neasham that he was concerned about his mother’s health and several people questioned the control that the annuitant’s significant other held over her. These two facts alone should give one pause when conducting business with the prospect in question.

Ms. Schuber passed Allianz’s suitability process on paper

While it is true that this annuity was suitable on paper, the home office issuing the annuity should not be held responsible for the issuance of an annuity that was actually unsuitable in the eyes of the law. The insurance agent is considered a representative of the home office. S/he is responsible for reporting any questionable issues that arise in the course of the sale of the contract.

Ever hear of field underwriting? There are things that just don’t show up on paper, yet are pertinent to the sale of insurance contracts. This is why there is a section for agent remarks on most insurance applications.

There was reason to believe that there would be an investigation regarding Ms. Schuber’s finances

The bank that held the certificate of deposit, which was being used as a rollover for the indexed annuity purchase, had discussed with Mr. Neasham their concerns about the prospective annuitant’s decisions, independence and ability to understand the annuity purchase. This was a big red flag and an opportunity to avoid the consequences that Glenn Neasham subsequently faced as a result of his eventual sale of the annuity.

Never mind that Ms. Schuber had a son that expressed concern about his mother’s health. It is a known fact that the majority of annuity complaints arise from children of the annuitant making a judgment over the suitability of their parents’ annuity purchases. This presents an opportunity to back-out of the sale at the time these concerns were expressed, or at least hold-off and spend more time assessing the decision-making ability of the prospect until reaching certainty.

It does not matter if the annuitant benefitted from the annuity purchase, or not, when determining whether the purchase was suitable

It does not make one bit of difference that the annuitant earned tens of thousands of dollars on the annuity she was sold. The state of California has determined that it was an unsuitable sale.

If I liquidated all of my assets, just to be able to fund the purchase of some preferred stock, and subsequently earned thousands in dividends on top of my original investment, does that make the transaction suitable? I have no house; I have no vehicle. My kids have nowhere to rest their heads, but hey, I have stock. I think you get my point.

Neither Allianz Life, nor any other insurance company, would lend moral support to any agent that is being questioned for unsuitable sales

Notwithstanding the issues arising from this insurance company being a stock-held insurer, as opposed to a mutual insurer, there is risk in supporting those that are suspected of a crime. (Remember what your mother said about guilt by association?) Just as we do not know the facts of this case, neither does Allianz.

For that reason alone, it is prudent that they remain neutral and not get involved in Mr. Neasham’s plight. I could give you hundreds of other examples where insurance agents were (in my opinion) wrongfully convicted of an unsuitable annuity sale (some even with Allianz Life), where the insurance agents were essentially hung out to dry.

Look, when you are an independent insurance agent, particularly in today’s day and age of regulation, disclosure, due diligence and scrutiny, you need to expect that you alone are responsible for your actions and the consequences that come with them. This is why I always advise agents to CYA — cover your annuities!

If it comes down to arbitration, the insurance company isn’t going to be standing in your corner with you. You chose to be independent — now protect yourself as if you truly are independent. The insurance company cannot afford the reputational risk associated with the defense of any insurance agent, justified or otherwise.

Neither Allianz Life, nor any other insurance company or trade group, would lend financial support to any agent that is being questioned for unsuitable sales

Providing financial support to such an individual not only does not contribute to the bottom line of the insurance company, but gives the appearance that one endorses the actions of the accused unsuitable salesperson. Not only does one not want to be involved with the reputational risk associated with such situations, but the insurance company does not want to implicate themselves by doing so.

It is horrible what Mr. Neasham’s family is going through. I would hate to be in the same situation. However, before we all become outraged with the state of California and the Allianz Life home office, we need to take these things into consideration. If you are truly upset, and support Glenn Neasham, send him and his family money yourself.

Ultimately, my best advice to everyone is to let Mr. Neasham’s case be a lesson to us all. With every sale, you should anticipate that you alone will be held responsible for the transaction. Never rest in your efforts to document, record and CYA in your practice.

If anything gives you pause in the annuity transaction, hold-off, ask questions and ask yourself if you would be willing to go to bat and put your family’s future on the transaction, in order to defend the sale. Just protect yourselves. Don’t let Glenn Neasham’s situation be for naught — learn from it.