July 15, 2008
Regarding proposed rule 151A.
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
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 and
5. Further expose risk-adverse consumers to registered brokers who are more likely to put them into market-risk vehicles in order to increase their long-term "assets under management".
This regulation may be well-intended but its premises are ill founded. The States and Insurance Companies are doing more and more to properly regulate the suitability of Fixed Indexed Annuity sales. SEC regulation is over-reacting and totally inappropriate.