September 3, 2008
Indexed annuities are fixed annuities being offered by insurance companies that guarantee a minimum interest rate and yet afford an individual the opportunity to earn interest greater than that guarantee. Furthermore, the owner of an indexed annuity has no risk of losing either the premiums paid or prior interest credited to their account due to fluctuations in the market. When the Dow Jones Industrials lost 20% recently, indexed annuity owners lost nothing. Of coarse, this is due to the fact that indexed annuities are not investments in the market as are securities.
Granted, indexed annuities have been improperly sold to consumers. Securities, which are regulated by the SEC, have also been improperly sold to comsumers. SEC regulation does not guarantee a consumer's protection. (In fact, there have been more complaints filed against securities sales than there have been filed against indexed annuity sales.) Indexed annuities are currently being competently regulated by the state departments of insurance and most have adopted annuity disclosures and suitability reviews to protect the consumer.
Since indexed annuities are, in fact, fixed annuities regulated by competent state insurance departments, and not investments in securities, SEC regulation would be inappropriate, redundant, and burdensome to regulators, financial consultants, and consumers.
I hold both securities and insurance licenses and I strongly believe the SEC should NOT regulate indexed annuities.