September 8, 2008
I am a purchase of FIA, not an insurance agent. I oppose the adoption of the proposed rule 151A by the SEC and request for an extension of the comment period.
If the rule 151A is adopted, the consumer will have less access, poorer services and higher cost due to reduced competition and sales channels.
I do not understand why the FIA need to be treated like a security product. Fixed Index Annuities are as secure as traditional fixed annuities. Both FIA and traditional fixed annuities guarantee no loss in premium and earned interests. The only difference is the crediting methods and potential gain. The proposed rule adds no additional consumer protections. Some issues on FIA occured in the past can be or will be fixed by the state suitability requirement.
When I purchased my Fixed Index Annuities from Alianze and American Equity, I had to sign the product disclosure documents, suitability form and replacement forms, etc. In order for me to sign the forms, my insurance agent had to go over the disclosure form and explain to me in details about how the products work, the crediting methods and the early withdraw charges, etc., which are disclosed in the disclosure document. When I purchased my variable annuity from a very big and famous brokerage firm back in 2001, I did not have to fill out any of those forms. The representative just told me the variable annuity worked like a mutual fund IRA account. That was all. I had to ask him about the cost, penalty and withdraw etc. I received the written doc (contract) after I purchased the variable annuities. The details were disclosed in the thick contract gave. I am sure many seniors may not have the ability to read and understand the language in the thick contract. However, the variable annuities are much more risky than the fixed index annuities. For that 2001 variable annuity purchase, I got big loss during 2001-2003 period. I moved out of it in 2006 still with a loss. I replaced it later with Fixed Index Annuities. This year the stock market has a big decline again. I did not lose any money in my Fixed Index Annuities. In addition, the total charges for variable annuities over years are much higher than Fixed Index Annuities. The consumers have to pay for the fees even for a loss position.
Hence, as a consumer, I strongly oppose the Rule 151A. I don't see much benefits for consumers.