Anil Vazirani, president of Secured Financial Solutions (Photo: Vazirani)
Anil Vazirani, a financial advisor who regularly sells indexed annuities, says some life insurers should be more conservative when they tell consumers about possible returns from indexed annuities that aren't filed as securities.
If an issuer wants to show a consumer that an annuity can earn 10% annually, with no risk, the issuer should file that annuity as a security, and an advisor who tells a consumer about the annuity should have a security license, Vazirani said last week in an email interview.
"This is a major consumer protection issue," Vazirani said.
Actuarial Guideline 49 now limits the kinds of returns agents can include in life insurance performance illustrations.
Regulators may need to develop similar rules for annuity return projections, Vazirani said.
The History
An indexed annuity offers a fixed rate of return that's backed by a state-regulated insurance company. A feature linked to the performance of a stock index, bond index or other investment index can increase the total crediting rate but never reduce the crediting rate below the guaranteed level.
The U.S. Securities and Exchange Commission regulates variable annuities as securities.
In 2009, the SEC classified indexed annuities as securities. Congress blocked that SEC move in 2010, by passing a bill that exempted state-regulated fixed indexed annuities from SEC oversight.
Today, issuers choose to register some indexed annuities with the SEC, but most are not.
High Hypothetical Returns
