September 4, 2008
I would like to submit some comments on this proposal based on my 39 continuous years of having a life health insurance license.
I agree that there are a few bad licensees who sell indexed annuities without full disclosure of the penalties involved when an insured surrenders an indexed annuity before the completion of it's term. However, most states now have suitability forms that the proposed insured must sign before committing to an indexed annuity. Are the insurance commissioners not doing a good enugh job?
Based on the research that I have done, it seems that there are far more complaints by consumers about variable annuities and all their hidden fees than than complaints about indexed annuities.
Insurance companies for decades have sold annuities with a guaranteed interest rate and a chance for the insured to have a higher return based on the success of the issuing company. Indexed annuites are exactly the same - except that the higher return is based on an independent index.
There is absolutely no risk to their capital.
The few indexed anuuities that I have sold are an alternative to meager saving and CD rates - not having having my client surrender an investment portfolio.
In regard to the high commissions - I find that most pay the agent about 1% per year that the money will be held by the insurance company with no additional fees for the life of the contract. I know many regulated registered reps who analyse a person's mutual fund portfolio - make a 6% commission by having them switch funds - and then charge and annual 1% maintenance fee. Besides these fees, the funds have an inherent maintenance fee. Who's fees are higher?
Over the past year we have experienced a drop in the Dow Jones and SP 500 in excess of 20%. People who simply invest in index funds are down that much. My clients with indexed annuiies have lost nothing.
I find that most people who refer to themselves as "financial planners" only manage a clients stock or mutual fund portfolio.
I help people with their life and disability insurance, health and long term care insurance, estate planning, life settlements, and understanding their medicare,social security and retirement benefits.
Indexed annuities are one small tool that I use in the right circumstance - including on myself and my wife.
A great injustice will be served on many planners like me if this rule is passed. It will force us to become affliated with a broker/dealer and have to pay higher fees for E%O insurance and to them.
I feel this is about control and higher fees - not about protecting the pulic.
Sincerely,
Richard Wirkus
Wallingford, CT 06492