SEC Tells VA Insurers: Dont Pretend There Are No Problems

“These are the kinds of abuses that appall investors, alarm regulators and should spark outrage throughout the industry,” Roye said.

He said he knows that many in the industry believe that variable products should be singled out for special suitability and sales practice standards.

Part of that concern, Roye said, likely reflects a concern that additional requirements will chill the sale of variable products, but the complexity of the products dictates that salespeople must devote diligence and care to their marketing practices.

Therefore, he said, he believes the proposed new variable annuity rules are merited.

But the regulators cannot do it alone, Roye said, and for reform to be meaningful and effective, the variable products industry must do it.

“We can write rules, but we cannot change attitudes,” he said. “We can examine compliance systems, but we cannot examine the conscience of those selling your products.”

The more difficult reform task, according to Roye, belongs to the industry.

“What are you prepared to do to address the problems?” he asked. “What will you demand of the brokers that sell your products? Will you refuse to do business with firms when there is continuing evidence of your products being improperly sold?”

Roye said he hopes the industry can find appropriate answers to these questions. “I submit that when your products are being missold by brokers and insurance salesmen, it is the problem of the insurance company sponsors of these products as well.”

Reproduced from National Underwriter Edition, June 18, 2004. Copyright 2004 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.