To those that think I am crazy that the SEC may

[etimer]

To those that think I am out of my mind when I say the SEC may end up taking over the insurance business, I invite you to read on of the posts on the SEC comment page for rule 151A

Comment
"Additionally, I believe that all life insurance agents and all life insurance companies should be held accountable under SEC regulations. Regulating indexed annuities is a good start."

There are people in government that feel the same as the commenter. The Treasury Department is trying to create a new government arm that would regulate insurance. So you may think this rule 151A isn't going to effect the P&C business but I suggest you re-think your position. First it may be the life companies but then what reasons stand in the way for the SEC to regulate the P&C companies?

Now is the time for you to be proactive and stop send the SEC a message. You can do that by posting your comments to the SEC rule 151A comments page.

If you think there is bureaucratic egocentric State rules......just wait until you start dealing with Federal rules. But maybe there are some on the forum that like excess bureaucracy.

[indexedannuitygirl]

Amen, etimer! You are right on!!

I have read the comments too, and you are absolutely right!

PLEASE SUBMIT YOUR COMMENTS- intelligent, articulate comments. Thank you! sm

[Big Dog]

To play Devil's Advocate, there are quite a number of life insurance agents that sell life insurance as an "investment" along with many life insurance companies that tout the investment side of their life insurance policies.

Additionally, there have also been many unscrupulous life agents that pull a "bait and switch" when selling annuities, not explaining the downside risk, costs, etc.

Given that the life insurance industry itself has done a poor job at policing itself, along with many state insurance departments (and commissioners), SEC intervention may be the best way to get these abuses under control.

Having previously been licensed by the NASD with the Series 7 and 63, along with previously holding the CFP designation (due to a career change, I have allowed these to expire), I can't tell you how many times I ran up against a life agent that was pushing his favorite (read high commission) annuity over the sound investment strategy that the firm I worked for had laid out for the client.

There are many real financial planners that I know that would welcome the SEC oversight of the life industry.

[indexedannuitygirl]

Big Dog,

Are you familiar with the differences between the complaint resolution process for consumers between the securities industry and the insurance industry? Far more efficient and far less costly on the insurance side. In addition, are you taking into consideration that a life insurance agent gets paid the average commission of 8% on an Indexed Annuity one time? This is to service the contract for it's entire term- on average ten years. Can you say the same of securities products?

Perhaps you can say that their have been some sales abuses, but there is only one complaint for every $109 million of premium in this business. I don't think the same can be said of the securities side. I believe that additional education requirements are perhaps a good idea. However, do you think that throwing prospectuses on the situation is the best solution? How does that protect the consumer? The same products will be disclosed less, and agents will not behave any differently- they'll just be fined MORE.
sm

[etimer]

I spent 15 years as a series 7 person and two more as a State RIA. Are you to ask me to believe that my brethren in the securities field have no problems?

Am I to believe you want to drag the insurance industry into this sort of crap.........

http://www.rrbdlaw.com/2006/nasddis.htm

"In 1996 the United States Department of Justice's Antitrust Division brought historic charges against 24 of NASDAQ's top market making firms. In that same year, the SEC lambasted the NASD/NASDAQ in a critical 21(a) Report that detailed years of harassment and abuse that was tolerated by the regulator. Finally, civil litigants entered into a much-publicized seven-figure settlement with the major NASDAQ firms because of the negative impact of their anti-competitive/anti-consumer practices. It was from that forge that the NASD Dissident Movement emerged in 1998 to field a slate of four candidates to contest the NASD's Board of Governors election, of which I was one of the nominees. Two of our candidates pulled off an historic, upset victory and from that moment, the landscape was forever changed."

"Wall Street has had a troubling history of the uneven application of its rules and regulations, which often results in regulators coming down more heavily on smaller firms than larger ones. Clearly, securities regulation can be hijacked to further political and anticompetitive agendas. As stated in 1996 in the SEC's 21(a) Report:"

I was always with independent BD's and I remember the above problems. Do I think they have stopped? No! FINRA is still a very big political animal.

Shame on those agents using the word investment. Investment: the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value. We must move closer to the Orwellian world and not call it an investment. When you are putting money into an annuity you are investing money in an annuity...no thats not right....you are participating in an annuity...no that doesn't sound right....you are socking money away. Ok....socking money away sounds very professional, we'll go with it. I do remember the insurance industry and the SEC came to an agreement where insurance people can't use that word. Shhhhh???? INVESTING. There I said it.

Do I sound a bit jaded? You bet I am. I'm tired of being a political football, being thrown on hail Mary passes when ever the big wire houses feel it is necessary.

One nice thing about not being a member of FINRA is, you can talk about them without fear of retaliation.

To play Devil's Advocate, there are quite a number of life insurance agents that sell life insurance as an "investment" along with many life insurance companies that tout the investment side of their life insurance policies.

Additionally, there have also been many unscrupulous life agents that pull a "bait and switch" when selling annuities, not explaining the downside risk, costs, etc.

Given that the life insurance industry itself has done a poor job at policing itself, along with many state insurance departments (and commissioners), SEC intervention may be the best way to get these abuses under control.

Having previously been licensed by the NASD with the Series 7 and 63, along with previously holding the CFP designation (due to a career change, I have allowed these to expire), I can't tell you how many times I ran up against a life agent that was pushing his favorite (read high commission) annuity over the sound investment strategy that the firm I worked for had laid out for the client.

There are many real financial planners that I know that would welcome the SEC oversight of the life industry.

[Big Dog]

Geeze...talk about being ganged up on...

Agreed that the securities industry has more than it's share of bad apples. There were a couple of broker-dealers that I was affiliated with that had run-ins with the SEC. Those SEC investigations led to much-needed changes within those broker-dealers. And agreed that the NASD has also failed in the past to properly address some of the wrong-doing by broker-dealers. However, the same can be said of state insurance departments.

That being said, the recent expose' by NBC on the abuses in the annuity sales industry pointed to the need for better control. However much you may think that NBC was jaded in their presentation, they still pointed to the loop-holes and abuses that go on.

As indexed annuities share characterists of both fixed and variable annuities (i.e. you can never lose your principle amount, as with a fixed annuity, but the investment returns will vary like a variable), I believe that better disclosure requirements to the consumer are called for. If state insurance departments won't address this, then it seems that federal (SEC) oversight may be warrented.

[indexedannuitygirl]

My intention is merely to educate, not to "gang up" on people.

The Indexed Annuity industry has found itself to be in the current position largely due to misunderstanding and misinformation in the press.

Therefore, I blog. I write articles. I speak in front of hundres of agents and registered reps. I teach CEs.

There is a need to set the record straight on these products. I am the only third-party independent expert on the product line. I do not endorse any company or financial product, and that puts me in a supreme position to speak on the matter.

Just as the B/Ds you were affiliated with had some issues, there may be some state insurance departments that have issues as well. However, that does not mean that all states are not doing a good job at their regulation of these products. Furthermore, not all carriers offering the products have issues with market conduct and suitability.

I'm not opposing the Dateline "expose`" because it goes against the product line that I believe in, but because it was shoddy investigative reporting. If Chris Hansen wanted to truly do his job, he would have looked into someone with an opposing viewpoint to Lori Swanson. He would have revealed that the 16-year surrender charge product that Aunt Alice was being proposed had a first-year premium bonus of 10%. But, you didn't see all of that. You also must take into consideration: how many agents did it take for him to get to the ones that did not fully disclose the annuity information? How much of the tapes were edited? We don't know what the full story was- we saw the sensationalistic reporting that NBC wanted us to.

Do you know what the disclosure requirements are for an Indexed Annuity? Have you seen the Annuity Disclosure Templates that have been implemented by the state the brings in nearly 45% of Indexed Annuity premiums? Once you have, perhaps I'll take your comments with a little more salt. Do you know that state insurance departments "won't address this?" I have spent the past three years tracking how individual states have enacted legislation specifically addressing precisely this issue. I can't feel that you are in a position to judge the disclosure on these products. It seems like you are basing your feelings more on negative publicity than on experience or expertise.

Sorry Big Dog, you need to go back to the dog house.
sm

[Big Dog]

Sorry Big Dog, you need to go back to the dog house.

FWIW, this type of attitude is one reason I left the insurance brokerage/company side and now work in risk management for a major healthcare provider in Houston.

[etimer]

I don't like tromping on ya big dog but I also have a bit of a mission to at least clear up all the misleading info.

People talk of complexity. I ask this, If I sit down and go over the algebraic expressions for the computation of each different crediting method, will that effect the buyers decision?" I really, really doubt it. Number one, I was a math head in school but how many people were not math oriented. Not many people over a certain age can remember how to nest parenthesis in the equation let alone being able to solve the equation? The people may not be able to do the equation but they can understand the idea of monthly average, or return that is based from one point to the next point? When they receive their contract the computations are in it for them to read.

Many, many years ago I had the idea that life insurance buyers needed a full understanding before deciding on which type of policy to buy. I had a presentation that lasted 20 > 30 minutes. Just a few examples of what I preached:

what are pure term rates.
how a temporary annuity due was used in computation of rates.
that level term to 100 was used in the computation of Whole Life.
that level term does indeed have a side fund, its just that the fund rests with the insurance company.
one dollar discounted for one year at X interest is equal to so they know how much the company needs to have on hand at the beginning of the year in order to have on hand at the end of the year to pay for each $1,000 of insurance.
And more and more................

People hated it. All they wanted was to know how much it cost, could they afford it and was it enough insurance. How many of the guying public care about life insurance Cost Indices's, the Net Payment Cost Index, the Surrender Cost Index? They indices's are illustrated but people don't care. The only people that care about such things are the regulators. For a total of 17 years I was involved in securities and I can't remember ever, not once did someone read the entire prospectus. Not even my CPA clients. Some people threw the prospectus in the round file before I left their office. I always gave them one but it made no difference to their buying decisions.

Mr Hansen never gave the percentage of commission when discussing high commissions. Why is that? Well public opinion would be very different if they heard the commission was 8% compared to the term "high commission." If people heard the high commission was really 8% many of the sales people watching the show would think....heck I make more than 8% on a sale. My industrial sales friend works off a 20% profit margin. Using the word "high commission" leaves the percentage amount up to the individual imagination. I read the same "high commission" writing on certain government sites. Yes, it is all to sensationalize. Let me ask, if a Reg Rep is working for a wire house and the market stinks, are we to believe that the brokers just sit there without selling anything. Are we to believe that the sales manager says, the market stinks its ok...you all don't need to make sales. Does anyone really think that is the speech given to the sales force? Do Reg Reps at wire houses have quotas? You bet they do. When I first got my S7 I wasn't sure about going independent or working for a wire house. I remember an interview at a big brokerage in San Francisco (it was in 1985). I was sitting on the 30th floor, a great view of the bay, listening to the person say this sentence: "having a securities license is like having a license to steal." Ok enough for me.....I decided independent BD's was where I wanted to be.

All annuity buyers get the Buyers Guide to Fixed Annuities Prepared by the National Association of Insurance Commissioners, they get their free look period, surrender charges are clearly spelled out in the brochures, the Buyers Guide tells of them and I don't know how much more print you need to give people. What you need is to weed out unethical people and it has yet to be proved that FINRA does a better job than State Departments of Insurance. Actually the SEC isn't always pleased with FINRA: FINRA's Regulatory Mulligan:
SEC Not Amused
Written: July 22, 2008
http://www.brokeandbroker.com/index.php?a=blog&id=66

You talk about investment returns vary. Well isn't that true of Universal Life, Excess Interest Whole Life and Traditional Annuities. Be it an FIA or a UL policy, the returns come out of the general fund. In a UL the non-guaranteed return may be based on what the company makes on their bill / bond investments in a general fund. Am I to assume that because the non-guaranteed return in a UL varies, it is a security?

Is an FIA the magic bullet? No it isn't but it is a good insurance product. Be it insurance or securities, there is no magic bullet. I've owned mutual funds, general securities and once played commodities. The commodities market was so exciting to me that at the beginning of the 1980's I held a series 3 license and worked as a broker. I also own FIA's.

Uou are correct, there are plenty of fingers to point in the securities business. FINRA can't stop it for securities and they won't stop the bad apples in the FIA business. Bad apples will never stop growing. You just catch them and toss them out. All the disclosure in the world won't stop them from growing.

Geeze...talk about being ganged up on...

Agreed that the securities industry has more than it's share of bad apples. There were a couple of broker-dealers that I was affiliated with that had run-ins with the SEC. Those SEC investigations led to much-needed changes within those broker-dealers. And agreed that the NASD has also failed in the past to properly address some of the wrong-doing by broker-dealers. However, the same can be said of state insurance departments.

That being said, the recent expose' by NBC on the abuses in the annuity sales industry pointed to the need for better control. However much you may think that NBC was jaded in their presentation, they still pointed to the loop-holes and abuses that go on.

As indexed annuities share characterists of both fixed and variable annuities (i.e. you can never lose your principle amount, as with a fixed annuity, but the investment returns will vary like a variable), I believe that better disclosure requirements to the consumer are called for. If state insurance departments won't address this, then it seems that federal (SEC) oversight may be warrented.