Regulatory concerns and competition from manufacturers of other products could hurt equity-indexed annuity sales this year.

The insurance research analysts at Fox-Pitt, Kelton, New York, present that argument in a research note discussing near-term prospects for a life insurer in the EIA market.

EIA sales have grown dramatically in recent years and probably will improve the sellers’ profit margins over the next few years, the analysts write.

But one source of EIAs’ appeal has been the fact that many regulators treat them as insurance products rather than as securities.

A recent notice from the National Association of Securities Dealers, Washington, that asks member companies to treat EIAs as if they were securities may have contributed to softness in EIA sales in 2005, and regulator scrutiny of EIA sales practices and EIA suitability guidelines may have also affected sales, the analysts write.

The analysts point to evolution of variable annuities as another factor affecting sales.

“Enhanced living benefit riders available on VA products that offer an alternative to EIAs” may have led to some of the weakness in sales, the analysts conclude.