WASHINGTON – Representatives of life insurers were out in force at the fixed indexed annuity fly-in event that took place here today.
Among carrier executives at the fly-in were Wendy Waugaman, chief executive officer of American Equity Investment Life Holding Company, West Des Moines, Iowa (NYSE:AEL), and Mary Dinkel, a vice president at Industrial Alliance American Life Insurance Company, Scottsdale, Ariz.
“I really believe the product is the best thing for the consumer,” said Dinkel.
W. Andrew Unkefer, a Glendale, Ariz., said one FIA advantage is that state regulators handle complaints themselves, rather than requiring consumers to go through arbitration.
“You have a state-paid advocate,” Unkefer said.
H.R. 2733 supporters made it clear that fixed indexed annuities are state-regulated insurance products, not securities that ought to be regulated by the U.S. Securities and Exchange Commission. The SEC has been trying to implement a regulation, Rule. 151A, that could give it dominion over indexed annuities.
Fly-in participants visited House members, but they are especially interested in the Senate, where they are trying to win support for S. 1389, the companion bill to H.R. 2733.
Rep. Gregory Meeks, D-N.Y., who has sponsored H.R. 2733, the Indexed Annuities and Insurance Products Classification Act of 2009 bill, with Rep. Thomas Price, R-Ga., spoke at a breakfast meeting on Wednesday before fly-in participants headed to congressional office buildings to speak to lawmakers and lawmakers’ aides.
Sen. Ben Nelson, D-Neb., the sponsor of the Senate companion bill, appeared at the fly-in welcome reception to thank fly-in participants for coming to help him build support. Nelson has been getting attention for being a Democrat who needs persuading to vote for a Democratic health bill.
Former Mississippi Insurance Commissioner George Dale, who is now a senior policy advisor in the Jackson, Miss., office of Baker, Donelson, Bearman, Caldwell & Berkowitz P.C., also spoke at the reception. He introduced Jane Cline of West Virginia, the current president of the National Association of Insurance Commissioners, Kansas City, Mo.; Kevin McCarty of Florida; and Ann Frohman of Nebraska.
Blair O’Connor, who has helped take the lead in organizing the fly-in, urged fly-in participants to have an “unbelievable day.”
“We’ve got to turn up the heat,” O’Connor said.
Tom Hobbs, a Justin, Texas, a retail insurance agent, said at the fly-in reception that he participated in the fly-in because he believes in the product.
“If you put your money in there with me, you will not lose a dime,” Hobbs said.
If the SEC succeeds at making FIAs securities, the difficulty of complying with securities regulations would make selling the products unappealing, Hobbs said.
Patrick McCormick, who wholesales and retails at McCormick Financial Products L.L.C., Washington, N.J., attended the fly-in even though he’s licensed to sell securities.
“I’ve had senior citizens crying and thanking me” because they’ve earned a steady 5% to 7%, rather than losing heavily in the market meltdown, McCormick said.
The SEC wants to take a product that offers relatively generous guaranteed returns, along with the possibility of earning extra returns, and add unnecessary regulations that will force sellers to add sales loads equal to about 2.5% of assets, McCormick said.
McCormick noted that securities registration costs $3,000 for the securities side of his business, vs. $400 for the insurance side.
Errors & omissions insurance costs him about $1,700 per employee involved in securities, versus $500 per insurance employee.
Perhaps just as important, securities law tends to emphasize that financial services companies should “know their customers,” while insurance law emphasizes privacy, and that can lead to serious conflicts, McCormick said.
McCormick said support for Rule 151a outside the SEC seems to be moderate.
Some insurers have declined to take a firm stand, and that has led to confusion in the Senate, McCormick said.
CORRECTION: An earlier version of this article misstated the current status of George Dale. Dale is a former Mississippi insurance commissioner.