While most of us in the industry have kept our eye firmly on SEC 151A, Sheryl J. Moore, president and CEO of Lifespecs.com and AnnuitySpecs.com, says we should be keeping an eye on Florida Senate Bill 1372 as well.
[Editor's note: Moore sent the following information to Senior Market Advisor regarding her thoughts on SB 1372.]
It has plenty of merit, but it also has the potential to be very damaging. Most notably, Florida regulators are attempting to limit surrender charges on annuities to five years, with a maximum surrender charge of 5 percent for consumers aged 65 and over.
According to the U.S. Census Bureau, Florida is the fourth most populous state in the nation, and the single most inhabited state for persons aged 65+. Nearly 20 percent of our country’s senior population lives [in Florida], which means that millions of seniors who need the safety and guarantees of annuities may soon lose access to these valuable products.
Why? The shorter the surrender charge, the lower the rates on the annuity. In addition, shortening the surrender charge means lowering agent commissions. Not to mention the fact that if surrender charges are limited to five years/5 percent, no premium bonuses will be available on these products, as you cannot price a bonus into a 5-year chassis. Independent agents and their field marketing organizations (FMOs) must receive enough compensation on the product to offset their costs, and make it worth their while — plus the rates on the product must be competitive with other safe money places (such as Certificates of Deposit). If the product cannot fulfill those needs, the product will not even be offered. Insurance companies distributing through independent agents will not take the time to develop such products.