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'EIA Honor Roll' Recognizes High EIA Renewal Standards

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EIA Honor Roll Recognizes High EIA Renewal Standards


American Equity Investment Life, Des Moines, Iowa, holds first place in the first Advantage Equity Index Annuity Renewal Honor Roll.

In second place is Clarica, Fargo, N.D., and in third place, Lafayette Life Insurance Company, Lafayette, Ind.

Rounding out the honor roll are: Life Insurance Company of the Southwest, Lincoln Benefit Life and Midland National Life.

Compiled by The Advantage Group, a Maryland Heights, Mo. EIA tracking service, the honor roll lists EIA insurers demonstrating high index annuity renewal standards, according to ranking criteria established by The Advantage Group.

The Missouri firm tracks EIA performance data of 44 EIA insurers, the large majority of the EIA market. Available for sale for the past six years, EIAs are fixed annuities that link their credited interest rates to the performance of an identified financial index, such as the S&P 500.

(Note: Some industry executives are now starting to call these products “fixed indexed annuities,” or FIAs. They are doing this to emphasize the fixed status of the products, and because a few of the products link crediting rates to bond indexes as well as equity indexes.)

“The Honor Roll is our attempt to highlight EIA carriers that have treated consumers fairly,” says Jack Marrion, owner of the tracking service.

Recognition on the honor roll doesnt necessarily mean a carrier has the highest renewal rates or even better renewal rates than another, Marrion says. Rather, it “identifies carriers that have met our requirements for high EIA renewal standards.”

Note: EIAs that guarantee all interest crediting components for the policys surrender period will never be listed on the honor roll, Marrion says, “because the underlying EIA renewal concern–sub-market renewal rates–is not applicable for these types of contracts.”

Honor roll standards are:

–Available & Comprehensive: The carrier must show the new renewal factors (participation rate, asset fee, cap on earnings) for issued policies on at least a monthly basis. These renewal rates must be freely available to anyone asking for them.

–Track Record: The carriers EIAs must have a minimum renewal history of 12 months. (EIA history going back to the later of product inception or three years will also be examined, but the highest weight is given to treatment of customers during the immediately preceding year.)

–Market Responsive: If the EIA carrier worsened renewal factors in response to negative financial market pressures, subsequent positive market pressures should reflect improved renewal factors. But if a carrier maintains renewal rates when pressures justify cutting rates, the carrier would be forgiven for not immediately raising rates when financial conditions improve.

–Promises Kept: The carrier keeps real and implied promises of renewal rate integrity.

In the future, The Advantage Group will monitor the renewal rate history of carriers on the list. “We will drop any carrier failing to meet our criteria,” Marrion says. Conversely, he says, “the list may grow longer as other carriers supply data in support of the criteria.”

Reproduced from National Underwriter Life & Health/Financial Services Edition, October 15, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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