Subject: File No. S7-14-08
From: Gilbert J Gray, Professsor
Affiliation: Founder of The Total Wellness Academy. Professor of Financial Wellness

November 2, 2008

Index Annuities are not securities as there is no risk of principle as structured. The problems arise with the disclosure and client understanding of integral parts of these annuities not loss of principle.

These integral parts of index annuities include crediting methods that are more complex than with the standard fixed annuity, the need or benefit of client selection of the crediting methods available, the surrender charges for extended periods of time, the riders that may be attached for various benefits.

Problems occur due to the mix of complexity and not because the client is subject to a risk of principle. These problems should be addressed by the companies offering the annuity with the oversight of state regulations and compliance.

Suggestions that might mitigate some of these problems and this does NOT include labeling the product as a "security' when by definition it is not,. These include:

1. Basic and required training of the insurance agent in the concepts and features of these annuites and should be company specific as there are many variations that need to be addressed. Each new product or revision of current policies should be subject to this training before commissions may be paid.

2. RE: Surrender charges. Offer the client a choice of a front end charge or a surrender charge over ten year period or less. Provide concrete examples of what this would mean in dollars if the client surrendered the policy after 3, 5, and 7 years at both guaranteed interest and acceptable proforma interest.

3. Provide the client with a summary page showing in clear, simple, concise language each and every point necessary to provide the client with a complete picture of all the moving parts. the features and benefiis. Have the client initial his or her understanding and acceptance of EACH point.

4. Require each company to establish a "customer relations" department who would select at random 5 to 7 policies sold by each agent during the previous 12 months, call on and interview each client to determine if they understand how their policy works and if they do not, make the client an offer to surrender or rescind without charge and with guaranteed interest. Representative to forfeit and repay any commissions paid.

6. If after a trial period of 5 years a problem stiill exists, establish a federal dept of insurance to replace the state system now in place.

In summary, the problem in the area of index annuities lies in poor trainiing and regulatory follow through NOT in risk to principle. Index annuities are NOT securities under the law and should not be defined as such.