Hawkeye State regulators have issued temporary fixed annuity illustration guidelines and say permanent rules may be in the works.
Iowa Insurance Commissioner Susan Voss has issued a bulletin, Bulletin 08-07, noting that Iowa insurance regulators think of illustrations as being advertisements.
Iowa officials are trying to decide whether they need to issue new regulations to encourage proper use of illustrations, officials write in the bulletin.
To help with the review, insurers that use fixed annuity sales illustrations should file copies of the illustrations through the System for Electronic Rate and Form Filing, officials write.
While work on any new regulations is under way, insurers should avoid predicting that a fixed annuity’s rate of return will “keep pace with or exceed the rate of inflation or the cost of living,” officials write.
Insurers also should limit producers’ ability to manipulate the interest rates and other comparisons in illustrations, and they should make sure that no fixed annuity illustration uses interest rates greater than the rate a policy pays on the date of issue, officials write.
“Illustrations should not show values higher than maximum cap values,” officials write.
Illustrations should include information about the guaranteed minimum surrender value, and illustrations for fixed annuities which contain a “fixed interest rate” must “clearly state whether or not the ‘fixed interest rate’ is actually permanently fixed or based upon an index,” officials write. “Consumers must be told if the ‘fixed interest rate’ may in fact vary, as determined on a contract anniversary.”