November 17, 2008
The proposal is not supported by any empirical evidence that supports the Commissions claim that widespread abuses in selling the product exist. The Commission cites its concern over improper sales practices as the primary basis for proposing Rule 151A. Yet, the Commission provides no study, research findings or statistical information to demonstrate or suggest that the abuses are endemic or pervasive. 41 states have adopted the NAIC Suitability Model and the NAIC reports that .1% of all complaints filed with state insurance departments relate to fixed indexed annuities. Members of the fixed indexed annuity industry, insurance industry groups such as the ACLI, NAIFA, NAILBA and IMSA, and insurance regulators deplore fraudulent, misleading or abusive sales practices.
The Commissions action would restrict public access to an increasingly popular product.Many independent insurance agents such as myself have indicated that they would not make fixed indexed annuities available to their consumers if the annuities were registered as securities – particularly because many such independent insurance agents do not desire to become registered representatives associated with broker-dealers due to the cost and
administrative burden relative to requirements that are inapplicable to the business of insurance. The result of agents deciding not to offer this valuable product would naturally limit public access to the product.
Such a result is harmful to the public because it restricts the availability of a product which provides the opportunity for greater potential interest while also providing principal and minimum interest guarantees. The appeal of indexed annuities is that they are not securities and not subject to risk of loss from market activity.
Fixed indexed annuities are currently subject to comprehensive state insurance regulation. I take my responsibility as a financial professional very seriously and my sales activities are subject to extensive state regulation.