August 12, 2008
I take exception to this proposed rule. The report roughly stated that clients participating in indexed annuities are exposed to market risk and volatility. This is frankly absurd. Indeed, the markets are volatile, but while the markets are currently down this year, equity indexed annuities guarantee the clients principal in the product. While the insurance companies do purchase options and long-term bonds which allow the client to participate in upside gains in the market, the clients money is literally NEVER put into the market, thus no potential to lose their principal. The principal in a variable annuity for instance is not guaranteed, because the client is investing his/her money directly into the market. Thus, the reason that VA's are a securities item - and indexed annuities clearly are not. As far as "protecting seniors," according to the NAIC, there were around 600 variable annuity complaints- a registered product, versus 300 complaints against indexed annuities, which are not regulated. Indexed annuities are not an investment, nor should they be sold as one. Clients are not put in indexed annuities to achieve the growth that they could perhaps capture in a mutual fund or VA during a good year. Instead, they are used as a tool that gives the client peace of mind, free from market volatility- preserving the wealth that they may have spent years building up. I have never sold an indexed annuity, and maybe never will, but I felt moved to speak my mind with regards to the SEC's assertion that Indexed annuities should be under SEC jurisdiction. There is a place for both securities regulated items, and insurance regulated items. I appreciate the work that the SEC does, and hope that the insurance industry and securities industry can peacefully cohabitate.