August 7, 2008
I don't believe the SEC should have oversight of index annuities for the same reason that I don't believe the SEC should oversee bank CDs. It is out of their jurisdiction. The state insurance departments should retain oversight control and regulation of all insurance products. The SEC should focus attention on hedge funds. These really are unregulated securities, and many people have lost all their savings investing in them. No one has lost a penny in an index annuity due to loss of account value, to my knowledge. As for surrender charges, there would be a decrease in value, if surrendered during the surrender charge period. But, mutual funds with a front-end load incur a loss of 5% or more on day one. Those with a backend load (similar to the surrender charge of an annuity) incur a loss of 3% if the investor leaves within the first three years. Why doesn't the SEC focus on these losses? Index annuities are long-term savings annuities which protect the purchaser from the loss of a downturn in the market. The insurance company assumes the risk, just as they do with other insurance products.