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May 01, 2005 at 04:00 PM
When we hear the expression “in other words,” we know the speaker suddenly has realized he or she is not making headway. Now, he/she is finally going to get to the bottom line and clear it all up.
Insurance product makers should do that in their consumer materials. They should clear up some of those awkward product words that keep fouling up the verbal air of their contracts, brochures and related items.
Take “participation rate,” for example. Index annuities use that term to indicate the rate by which the policy’s credited interest will be computed. It’s really a mouthful. It’s clumsy to say, hard to visualize and difficult for a lot of people (industry and consumer side) to understand.
No doubt the term was borrowed from the mutual fund industry, where brokers tell investors they are “participating” in the market when they own mutual fund shares. But, in index-annuityville, participation rate means something quite different–and consumers who already own mutual funds might get the two mixed up.
Sure, most product materials define the term, and most astute advisors go over its meaning with the client. But why not just call it something simple, like the “link rate” or “index link rate”? Those terms are closer to the actual meaning–i.e., a rate linked to changes in the policy’s stated index. Those terms are also a lot easier to say, and they don’t suggest the policy owner is participating in a market.
How about that other term that’s a mouthful, “annuitize”? Many an industry professional has said they wish that word would just go away. To their credit, some industry thinkers are trying a workaround term–”pensionize.” That’s better, but why “ize” this at all? Why not just say “enters payout stage” or “starts income stage” or some other short phrase for this particular annuity shift?
Maybe the “annuity” word should go away, too. I can’t tell you the number of times people have asked me, “What is an annuity?” They get “pension,” “IRA” and “401(k).” But they don’t get “annuity.” So, either polish that apple or chuck it.
The long term care insurance industry seems to have a grip on some of this. For instance, LTC policies call their home care benefit–what else?–”home care benefit.” So, too, with the nursing home benefit, bed reservation benefit, and so on. Gee, what a concept. Clarity.
