Subject: Comments on File #S7-22-97 Author: "MICHAEL J. KRUGER" at Internet Date: 10/21/97 10:25 AM Mr. Secretary: As a registered representative since 1980 and a life insurance agent since 1974, I'd like to add my opinion on what role the SEC should play, if any, regarding Equity Indexed insurance products. First, I think there is too much securities regulations that broker-dealers and reg. reps. must deal with. Protecting the consumer is important but there are too many "rules" instead of guidelines. While I recognize there will always be people who take advantage of any system to cheap the public, some rules and controls don't really protect the public instead make work for b-d compliance people and cost a lot to administer. Second, it is my feeling the SEC shouldn't regulate all Equity Indexed products but should develop guidelines for insurance carriers and insurance commissioners to consider when developing products and approving them. For example, indexed products that offer multiple index choices for the consumer to choose from should be regulated. They are going to be sold by non-reg. reps., then the agents should have to complete SEC-approved training on the product(s). The SEC should work with the NAIC to develop specific questions to be included in life insurance appointment exams for new agents. Perhaps working with them to require specific appointment for indexed products like many states do for variable products. Third; with the increase in products available, there is a lot of difference between products that is confusing even to agents. Since the way companies can issue these products can change from month to month, the SEC should consider developing guidelines for product development. For example, some indexed annuities allow the insured to participate in dividends and capital gains. Some don't. Unless the consumer reads all of the material, it's hard to know just from the generic product name. I suggest the carriers be required to label their products as participating or non-participating. Same way with indexed life products. A different label could be used so people don't confuse these products with participating life insurance products. Another example is how participation rates are determined. The term "participation rate of 90%" doesn't always mean the same thing from company to company. What the consumer participates in, and how, and when may be different. I have no problem with companies being creative in product design but there is no easy way for agents or consumers to compare indexed products to each other. As part of the guidelines, the SEC could recommend that Classes of Indexed products be established, based on how participation is handled at issue. From my research, there are about 9-12 variations currently available. Once classes are established, require non-regulated products be defined by one of the classes and carriers must identify which class or classes their product(s) are in. The consumer could have a choice to have their policy issued from a choice of classes. If so, they need to be able to compare the product they're considering to other products in the same class. As I stated above, I am not a great fan of tight regulation. I am a strong believer that government regulators should establish guidelines vs rules and advise the regulated whether their activities meet those guidelines and help them meet those guidelines. When a company or individual violates those guidelines to the detrement of the public, the regulator then should step in to take action, and when necessary apply punishment. I hope these comments are helpful in your consideration of what direction the SEC should take with indexed products.