August 28, 2008
Dear Secretary,
I am an independent licensed life insurance, health insurance and annuities agent, currently working with Ascencea and American Equity Investment Life Insurance Company. I am greatly concerned with the proposed rule and believe my business will be uniquely affected if enacted.
Since an indexed annuity provides long-term savings and wealth accumulation, with guaranteed interest rates, are tax deferred, and provide a lifetime income, without the downside risks attributed to the stock market, they should not be considered to be, or, be lumped with the variable products currently marketed. As you know they are fixed annuities, underwritten and backed by an insurance company, with interest credited based on upward movement of a financial market index…again with no risk of losing any of the principal.
One of the statements provided as a training tool by American Equity, as part of the features of an Indexed Annuity, states that it..” is an insurance product, not a security.” Securities, as you know, run the risk of being able to lose all or part of the client’s initial “investment”. An indexed annuity, technically, is not considered an “investment” because there is no risk of losing any of the initial principal deposited in the annuity. It also does not impinge on the contract value already credited.
In the definition of “Suitability”, when evaluating the client, and how suitable they are to enter into an annuity, and determine if they have adequate funds in liquidity, the origin of suitability is from the securities industry. The NAIC Model Act for annuity sales paralleled NASD 2310. It states that…” the analysis required for fixed annuities differs greatly from the historical securities analysis for suitability. The primary analysis in the securities world revolves around risk tolerance of the client and appropriateness of the recommendations in light of the consumer’s risk tolerance.” Again, there is no risk attributed to the indexed annuity, since there is nothing the client can lose by entering into it.
The required changes for insurance carriers and producers will dramatically increase costs for those who sell and buy these annuities. If absolutely necessary, prior to a definite decision being made, an adequate debate should take place, representing both sides sufficiently, and therefore, not be rushed to adoption without proper dialogue. After all, we, the industry marketing the product, as well as consumers affected, should have adequate time for examination and analysis to determine the extent of its impact.
As you know, there are currently in place, steps to protect and correct any abuses in our field, which will probably continue over the years, mainly due to the few who will abuse any system in place, because that is what “they” do.
Again, I respectfully submit and request the indexed annuity product NOT be considered to be a security in any way, form or practice. Thank you for taking the time to read this.
Sincerely,
Terry L. Land