Recently, the Iowa Insurance Division adopted rules 191-15.80-87. These require all producers who wish to sell indexed life or indexed annuity products in Iowa starting Jan. 1, 2008 to complete a 4-credit training course on the products.
The state is in a supreme position to lead the way with this industry-changing educational requirement, given that more than 40% of indexed life and indexed annuity premiums flow through Iowa domiciled companies (Advantage Index Sales and Market Report, 3rd quarter 2007).
Many states will likely follow suit. But before that happens, the regulators themselves should be required to take the same training. Here’s why:
Over the past 2 years, select insurance and securities divisions have provided bulletins, notices and instructions regarding indexed annuities that are incomplete, inaccurate or downright misleading. Yet these are the people to whom insurance companies look for approval of products, insurance agents for approval of their licenses, and consumers for protection.
When regulators don’t take time to educate themselves on a product before issuing public notices, the results can be embarrassing if not damaging. Consider:
1) William Galvin, secretary of the Massachusetts Securities Division, released an “important message” to state residents warning consumers about annuities.
Annuities, he said, “are almost always not a good investment for older people.” But this contention can easily be disputed. An annuity is the only product that can guarantee lifetime income, providing a secure retirement for millions.
He also said annuities “often have no long-term guarantee of the interest to be paid.” Perhaps Galvin hasn’t been instructed that fixed annuities guarantee a minimum interest rate for the entire duration of the contract. This includes indexed annuities.