Iowa insurance regulators are joining with several industry trade groups in a pilot project designed to help consumers wade through the complexities of the fixed and index annuities they are buying.
The Iowa Insurance Division said last week it is joining the American Council of Life Insurers and the National Association of Fixed Annuities to promote use of an annuity disclosure template developed by the ACLI and the Association for Insured Retirement Solutions, Reston, Va.
At issue is a huge market. For example, in 2006 alone, $25.3 billion worth of index annuities alone were sold, according to Sheryl Moore, head of Advantage Group Associates, Inc., Pleasant Hill, Iowa, which maintains a website that tracks index-annuity sales.
Through the third quarter of 2007, actual sales of index annuities were $18.8 billion, according to Moore.
Preliminary data indicates projected sales of $25.1 billion 2007, Moore said. Sales dropped from the prior year because declining interest rates made the product less attractive to yield-hungry customers, she said. The interest rate environment was particularly challenging in the last half of 2007, Moore added.
According to Iowa regulators and the ACLI, participating insurers will use the standard disclosure document for one year in marketing fixed annuities and index annuities to evaluate how well consumers like the document and how well they understand the disclosures.
The template will not be used in marketing of variable annuities. The ACLI and NAVA also plan to expand the initiative into this product, according to Frank Keating, president of the ACLI.
The trade groups are continuing to work with the Securities and Exchange Commission and the Financial Industry Regulatory Authority to achieve regulatory acceptance of the variable annuity disclosure template in connection with federal disclosure and sales practice standards, he said.
“Consumers and regulators want clear explanations about annuity contract benefits, costs and features,” Keating said. “We do too. So we boiled down the legalese in annuity contracts and present it in an easy-to-read format.”