August 5, 2008
1. I want to applaud your efforts to protect consumers regarding fixed indexed annuities. It seems as though the main issue has to do with sales and marketing tactics, as well as lack of disclosure that some agents use when selling index annuities. Even though I applaud you with regards to protecting consumers, I do not see making this product a security as a solution to these issues. Unfortunetley, misguided agents will continue the misrepresentation no matter what, and the state regulators have done a great job cracking down on these issues.
2. I also want to remind you why index annuities are popular. As you know the stock market involves risk. People can loss money in the market. An index annuity allows a client to invest money and they can't lose principal because of market downturns. Index annuities are viable solutions for many risk adverse cleints. The very fact that index annuities have contractual written guarantees should exclude them from the definition of a security.
3. State regulators have already stepped up with regards to suitability and compliance. They are watching and monitoring public seminars very closely. Anyone focusing on Senior investors are under tremendous scrutiny by the state regulators. These regulators are making sure that agents represent index annuities truthfully by disclosing all product features. State regulators are making perfectly clear their intent that agents provide these products only to those cleints whom are suitable. If the agent fails to do so, the state regulators again have made it clear that they will take any and all action against the agent for their misrepresentation.
4. If this proposal goes through, the potential impact if far reaching. Not only will agents lose income, they may also have to find different jobs, because they do not want to become securities licensed. Secondly, there are thousands of non-securities licensed people currently working at these insurance companies whom will loss their job. The potential millions of dollars necessary for insurance companies to comply with this proposed ruling will directly affect current policyholders as well as future policyholders. Insurance coompanies will have to restructure their entire portfolios in order to make up for expenses generated by this proposal. Loss of jobs, loss of income, increased expenses to policyholders all in the name of reguluation of a product that is already regulated is not a good idea.
5. My summary is this. The insurance company has already taken steops to clean things up, let them finish the job. Suitability is the #1 priority of the insurance industry. Indexed annuities are guaranteed products. Clients have not lost a dime due to market losses. They are a very viable product and this ruling could keep thousands of risk adverse, qualified clients from hearing about this product. Because of indexed annuities inherant guarantees, it does not fit the definition of a security. The potential financial impact could be tremendous. Tens to hundreds of thousands of jobs lost, and multiple millions of spendable income could be stripped from the economy. With everything going on today, this is the last thing we need.