CEOs at major life insurance companies think that providing guaranteed income in retirement is important enough to give priority to a disclosure document project for annuities.
The project encompasses variable and fixed annuities, including fixed index annuities, and could meet a disclosure requirement in the Annuity Disclosure model act of the National Association of Insurance Commissioners, Kansas City, Mo.
Companies want to "address the negative perception of annuities so that people will understand they need guaranteed income," said Linda Lanam, a representative for the American Council of Life Insurers, Washington.
"Often, one may think of business people as not taking consumer problems seriously, but this is a customer issue," she said. "These products will be essential in meeting retirement savings needs."
And important to the industry as well, statistics suggest. In first quarter of 2007, total deferred annuity assets grew 1.2% to nearly $1.97 trillion, according to LIMRA International, Hartford, Conn.
Given this fact, executives at several companies who say that income planning will be important to the industry going forward discussed why disclosure and transparency are important.
As part of the Annuity Disclosure model, a disclosure document is required.
The ACLI's CEO task force took a hands-on approach in shepherding this project, Lanam said. If a disclosure document is required, Lanam explained that the sentiment was to make it a strong enough one so that it would be used to meet that requirement.
For instance, Lanam said that under the stewardship of Thomas Marra, president and chief operating officer of Hartford Life and newly named president and chief operating officer of Hartford Financial Services Group, Hartford, Conn., the task force offered directives on the type of document they wanted to create: a simple 2-pager that answered questions that continue to come up during the sales process.
Questions covered include topics such as how money grows and how fees are applied.
Brenda Cude, a NAIC-funded consumer representative and a professor with the University of Georgia in Athens, said the project is important because its developers went right to consumers to ask them what they felt was important. Consumer focus groups gave developers a better sense of what consumers read and what they need, she added. The overall opinion of consumers that assessed the work was that it is readable, she noted.
"I think it is admirable that an industry group says, 'We need help doing a better job,'" Cude said. There are different disclosure templates for variable and fixed annuities, she noted. "This is a requirement, and they're saying, 'Why shouldn't we do the best that we can?'" she added.
"In many ways the insurance area is behind the curve, compared with other areas in the financial services industry in finding more effective ways of disclosure," and this offers a way to catch up, Cude said.
