WASHINGTON BUREAU — The U.S. Securities and Exchange Commission (SEC) is giving the variable annuity summary prospectus “very serious consideration,” but it is declining to commit itself to acting on the issue this year.
Susan Nash, an SEC associate director, discussed the prospectus issue here during a regulatory conference organized by the Insured Retirement Institute, Washington.
Nash said it will be difficult to determine whether the issue will appear on the SEC’s agenda this year.
A full summary prospectus typically ranges from 100 pages to 300 pages in length.
Also at the conference, the IRI unveiled a report on a summary prospectus survey it commissioned.
The survey team found that 94% of the consumers who participated said they would prefer to receive a shorter, printed summary prospectus instead of a full prospectus if details were available online or upon request. This is up from 86% in a similar survey conducted one year ago.
About 70% of insurance industry executives have told the IRI that the ideal length of a variable annuity summary prospectus is less than 10 pages.
The group “recognizes that a summary prospectus may sometimes be longer to incorporate riders and other information that companies offer,” IRI officials say.
Few variable annuity owners said they read product prospectuses at the time they are making the decision to buy an annuity.
Only 5% of the participants said they always read the current prospectus, and 78% said they never read it at all; 87% said they rarely or never use prospectuses to answer questions about annuities after purchase.
Most of the consumers who do read prospectuses before buying an investment or variable annuity said they look more closely at the sections concerning fees, expenses and risks than they look at the sections concerning death benefits and other contract benefits.
“Deductions from accounts in the forms of sales loads and commissions are read by 88% of respondents,” the survey team says.
Melanie Waddell of Investment Advisor, a Summit Business Media publication, contributed to this report.