July 11, 2008
Insurance agents and professionals provide an important and valuable service to clients by offering insurance and annuity products.
Brokers and licensed security professionals have a conflict of interest as they make more commissions by making more trades for their clients, whether it is in their clients best interest or not. Brokers usually offer investments with greater degree of risk, as they are not guaranteed instruments like index annuities and life insurance. Index annuities provide greater protection and long-term appreciation then mutual funds, stocks and variable annuities.
Indexed annuities have been successful because the nature of the product meets the needs of the saving public.
Indexed annuities are risk - adverse savings vehicles - they are Not high-risk investment products where a consumer can lose his or her principal.
Indexed annuities offer consumers important protections, namely: (1) the guarantee of premiums paid and (2) guarantee of interest credited.
Indexed annuities provide underlying interest guarantees required by state law.
There is little difference in the risk to a policyholder for a traditional fixed annuity versus an indexed annuity. Under both forms of annuities, the policyholder is at risk to the insurer's annual interest rate declaration, whether it is an expressed percentage amount or a formula relating to changes in an index.
The sales practices and suitability safeguards needed for index annuities are the same safeguards needed for all life and annuity products.
The proper supervision needed for traditional fixed annuities, indexed annuities, and life insurance can be, and is being, performed according to state insurance department rules.
The results of the SECs proposed rule will not be to benefit savers but to:
1. Reduce the number of agents who can offer a product that is beneficial to many savers
2. Burden indexed annuities with unneeded additional expenses (for filing, regulation, and supervision), the cost which will be borne by savers
3. Damage financially many individuals, small businesses, and smaller insurance companies and
4 Give Broker/Dealers the ability to suppress a viable, valuable, and successful form of retirement savings which has and would continue to provide strong competition to those retirement savings offerings traditionally made by Broker/Dealers.
Sincerely,
Lee W. Papier