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One challenge for consumers thinking about buying indexed annuities may be the lack of well-known, accessible tools for comparing the performance of various investment indexes, or even knowing which of the indexes have been around for 10, 15 or 20 years.
The Center for Economic Justice — an Austin, Texas-based group that's skeptical of use of newer investment indexes in indexed products — raises questions about index information availability in a comment letter sent to the National Association of Insurance Commissioners' Annuity Disclosure Working Group.
Annuity issuers have asked regulators to let them illustrate the performance of indexes that have been around for less than 10 years, especially when the indexes are made up of other indexes that have been around for at least 10 years.
The Center for Economic Justice has been asking state insurance regulators to keep the illustration rules as is, or to forbid illustrations of the performance history of indexes with less than 20 years of performance history, to keep issuers from building products around indexes that appear to offer high growth rates simply because the indexes were started after the last big stock market crash, which occurred during the 2007-2009 Great Recession.
The Center for Economic Justice says it found that even annuity data providers seem to be having some trouble with tracking and comparing the 90 investment indexes now in use in indexed products.
Keeping insurer performance illustrations in check is important, because, if consumers do not have good tools for interpreting the illustrations, and the product marketing promises turn out to be false 15 or 20 years in the future, the annuity purchasers will have no meaningful remedy, the centers says in the comment letter.
"While industry will be able to adapt to almost any set of illustration guidelines that create a level competitive playing field, consumers have neither the time nor flexibility to recover from misleading sales and defective products," the center says.
