September 6, 2008
I currently work as a VP in the marketing department of a small insurance company in Baltimore. I have worked with annuities for over 20 years. The company I work for now sells less than $10MM of annuities annually. we are more focused on life insurance currently, but I feel strongly about this issue, because I know the facts.
I have a Series 7, and I am very positive about the role of securities, i.e., true equity investments, in a person's financial portfolio.
The fact is that there is no risk to market principal in an indexed annuity. They are not securities. If the market suffers poor performance, the account value does not. The guarantees are real. They are true insurance.
The fact that surrender charges on some plans can eat into principal in early years is typical of any insurance contract. As long is this dynamic is prominently disclosed, such a dynamic is perfectly acceptable given the benefits a company can deliver in exchange for protecting that flight risk.
Indexed annuities and traditional fixed annuities are not securities and should not be regulated as such. Indexing simply takes the renewal crediting decision out of the hands of the actuary and leaves it to an independent formula.
Mike Ebmeier
Former Chairman of the National Association of Fixed Annuities, Securities Series 7 Designation holder, long-time insurance industry participant, voter
410-336-4086