August 7, 2008
To U.S. Securities Exchange Commission:
The proposal to require a securities license to sell indexed annuities and indexed life insurance products is totally illogical. Such licensing is required of stock jobbers and mutual-fund salesmen because of the very real possibility of loss of principal by the purchaser if they buy into a bad stock or stock fund, or are caught in a falling market.
Life insurance products and annuities, however, are NOT "Securities." There is no price speculation involved and no possibility of loss of principal through dips in the market or the failure of the company.
Unlike stocks or mutual funds, insurance policies and annuities are not a gamble. They are a secure way to save money for the future. Licensed Life Insurance agents have been selling life insurance products for over a hundred years in this country, and no customer has suffered any loss through market activity or failure of a company.
The "indexing" feature was introduced purely and solely as a device to enhance the return to the policy owner or annuitant, above and beyond the guaranteed return from interest payments. But such indexing applies only on the upward movement of the market and not on any downturn, so there are no market risks whatsoever.
Life Insurance companies have proved themselves to be the most stable and the most solvent in our financial world. Where banks fail, where brokerage houses go bankrupt, and where bond salesmen go to prison, the life insurance companies endure.
Plainly put, this maneuver has nothing to do with consumer protection, but is simply a clumsy attempt by the securities industry to "muscle in" on one of the more successful products created by the life insurance industry.
Show some integrity, and reject this proposal.
Keith R. Mills, Ph.D. Economist