Subject: File No. S7-14-08
From: Raymond L. Peterson, MR.
Affiliation: Peterson Agency, Fixed/Fixed Indexed Annuities, Life, LTCi, D.I.

September 9, 2008

TOP 10 Index Annuity Misconceptions
By a president and chief executive officer of any Annuity
Firm from IOWA.

Misconcetion 10: All IAs have high surrender charges. Actually, over 45% of IAs sold had 10-year surrender charges as o 1Q 2008. Note: NBC-TV's Dateline expose on IA sales earlier this year highlighted an IA with a 16 year surrender charge, but it was one of only 2 index annuities having the longest surrender charge duration in the industry. Ignored was the fact that some IA surrender charges are as short as 1 year.

Misconception 9: All IAs pay big bonuses. Not so. Many IA
advertisements do involve big bonuses of say, 10%. However, top selling IAs sold had a 5% premium bonus. Keep
in mind that carriers usually need a longer surrender charge to offset a premium bonus, so some of these IAs have longer surrender charges.

Misconception 8: All IAs pay high commissions. In reality, the average street level commission for all IAs as of 1Q 2008 was 6.89%. Judged by IAs sold, the average
commission was 8% of premium in that quarter. One IA did pay as high as 13%, but keep in mind that some IAs pay as low as 1% also, IA commissions are paid one time in exchange for the agent servicing the policy for the entire
term.

Misconception 7: IAs are just used to target seniors. Let's get real. Do cereal companies "target" children with breakfast cereal? No, but children are the primary
demographic for cereal, just as seniors are for index annuities. IAs are retirement income products, folks,and usually people retire when they become seniors. Gasp How
predatory of the financial services industry. (Note: The
average IA issue age in 1Q 2008 was 63.)

Misconception 6: IAs are investments. Wrong IAs are a safe money place, comparable to other safe money places such as CDs and traditional fixed annuities. To compare IAs to "risk money" places, such as variable annuities and
mutual funds, is apples-to-oranges. Consumers buying IAs want the safety of guarantees with the potential: they are
too risk-averse for securities.

Misconception 5: IAs have countless consumer complaints. In my review of closed consumer complaints of the National
Association of Insurance Commissioners database, I found that all 58 current IA carriers had a total of 235 complaints in 2007, averaging just over 4 complaints each. With any single carrier, the complaints ranged from
0 to 95. Interestingly, VA carriers drew a greater number
of complaints that IA carriers in the same period on an absolute basis.

Misconception 4: IAs are illiquid. That's false. Only 6 of the 344 IAs available today do not offer the option for
10% penalty-free withdrawals annually (many offer it as early as the first year). In addition, 89% of today's index
annuities have some sort of surrender charge waiver, allowing clients to access funds without penalty, say in event of nursing home confinement, disability, terminal illness, unemployment.

Misconception 3: IAs put the consumer's money at risk. The only risk to the IA client's money is if the owner surrenders early, or takes out more than the penalty-free amount. One of the IA's primary attractions is that it provides principal protection. The funds backing the IA are held in the insurer's general account, not a separate account (as with securities). Consumers always have the peace of mind of knowing they are protected by the IA's minimum guarantee. If heaven forbid "some-thing happens" to the insurer, the consumer would be protected by the state guaranty fund-like "sleep insurance"

Misconception 2: IAs aren't regulated. This is absolutely inaccurate. IAs are fixed products, and thus regulated by the individual state insurance departments. To date, 31
states have adopted the Suitability of Annuity Sales model
regulation. The American Counsel of Life Insurers and the National Association of Variable Annuities have worked on a joint
Annuity Disclosue Model Regulation. Several states require advisors to take additional continuing education to sell annuities, and the state of Iowa specifically requires 4 hours of CE to sell index products. Products must meet strict non-forfeiture testing, marketing material guidelines and other tests that each state sets forth.

Misconception 1: IAs are complex. That's anti-IA hype.
IAs are just fixed annuities with a different way of crediting interest.