A study for the National Association of Insurance Commissioners reports that of 50 annuity insurers surveyed, 12 have either left the annuity business or gone into rehabilitation since 2008.
The findings are based on a data call issued in 2008 to annuity insurers by regulators in the state of Iowa. The study had a specific focus on the sales and marketing of fixed indexed annuities.
The study found that in 2007, premiums for the FIAs among the 50 companies reporting total more than $21.5 billion, down from $22.2 billion in 2006 and $23.4 billion in 2005.
In each of those years, about half of FIA premiums were from the issuance of FIAs to replace another annuity product owned by customers. Premiums from surrendered FIAs made up about 10% of the premium in each year, NAIC reports.
Over the 3 years, independent agents sold 61% of FIAs, while banks sold 18%. General agents accounted for 10% of the total, while captive agents had 4% and other sources, 7%.
The survey also examined the practices of annuity carriers in assuring the products sold were suitable for specific customers, as proposed by an NAIC model regulation.
NAIC found 43 of the 50 responding companies have created procedures to oversee producers’ annuity recommendations for their products.
Of the remaining 7 carriers, none had instituted suitability rules in 8 jurisdictions that did not require them.
The NAIC noted that 6 states and the District of Columbia have neither adopted its model regulation nor a similar statute requiring suitability of annuities, while 5 other U.S. jurisdictions had no mandate requiring carriers to supervise financial advisors’ annuity recommendations to clients.
Of the companies instituting suitability procedures, 8 had delegated their supervision to a third party, NAIC found.
Mississippi, New Hampshire, New Mexico, New York, Pennsylvania, Vermont and the District of Columbia have not yet adopted either the NAIC model regulation or a similar requirement governing the suitability of annuities, NAIC notes. Also, American Samoa, Guam, Northern Marianas, Puerto Rico and the Virgin Islands had yet to take action on suitability.