Friday, January 2, 2009

With a Little Help From My Friends-2

"Certain annuities contracts tied to the performance of a stock index will be treated as securities rather than insurance products, the [SEC] ruled. The 4-1 vote Wednesday ends a long-running dispute over the status of indexed annuities, subjecting them to additional disclosure rules and altering how they will be sold to investors", Jessica Holzer at the WSJ, 18 December 2008.

This article was titled, "SEC Targets Indexed Annuities". It should have been titled, "SEC pays off for Stock Brokers". What disclosures does the SEC want to add to those the insurers made in describing indexed annuities? My last post on this was on 25 August 2008, link:


Anonymous said...

Disclose some fees and risks for investors?

IA... that's ridiculous... insurance is about feeling covered against risks... isn't that good enough to retire on?

Independent Accountant said...

A typical insurance company disclosure document for an equity-indexed annuity will run about 150 pages. All sales fees, limits on gains and losses and risks are disclosed. I agree with you, insurance products are sold based on making the customer feel safe. Do you think the insurers will add any disclosures to make the SEC happy? The article did not state the SEC found the documents misleading. With all the SEC has on its plate, why is it worried about these products which state regulators look at? Do you think the SEC will better protect buyers of these products than the states? I don't. The SEC is likely to run interference for the brokers who will sell these products.

Anonymous said...

States versus feds...

Regulatory capture everywhere?

Full plates everywhere?

Hard to say IA... imperfect world... I wonder if anyone has done a comparison of securities and insurance disclosure... generally minimal stuff from insurers on insurance products reaches the user (sold by agents)... and the 150 pages is nonsense... how many people are capable of understanding or interested in that? That's for CYA... eh?

Independent Accountant said...

I agree with you in part. Yes, we have regulatory capture everywhere. That said, I'd rather let the states as opposed to the Feds regulate these products. Getting the SEC involved will give it one more excuse to ignore Wall Street. When I have looked at the sales documents for these things, they have averaged 150 pages; 95% of which is CYA. The insurers attorneys try to anticipate everything! Do the customers read these documents? Rarely. They might read the 8-page summary in front. I've had clients come to me and complain about annuities from time-to-time. I tell them bring the sales material. I find the relevant section, point it out to them and ask, "Did you read this"? Without fail, "No". Then I say, "What do you think an attorney can do for you given you admit you had this document in your possession for a week before you bought"?
The insurers are very careful to disclose all fees, surrender charges, etc. Do the customers care? If they do, they don't buy annuities at all but no-load mutual funds!

edgar said...

hello i.a.,

boycott everything. i give insurance companies as little as possible. I wouldn't buy an annuity if my life depended upon it. The mattress is safer imo.

Annuity said...

This is awesome blog!I liked the way you have presented various things togther in a beautiful manner.
Buy Annuity

toronto bathroom renovations said...

You have a startling blog. Thanks for escalating my awareness. I was not well-known with it. For more update I will be in touch with your blog always.