History might repeat itself, but not in the individual annuity market.
That seems to be one of the key messages in the annuity illustrations section added to a proposed revision of the Annuity Disclosure Model Regulation.
Members of the Life Insurance and Annuities Committee at the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., agreed earlier this week during a conference call to endorse the proposed revision and release it as an official “exposure draft.”
Releasing an exposure draft is part of the NAIC’s official process for seeking and reviewing comments on a proposed model or model revision.
The proposed “Section 6″ would require that any illustrated be clearly labeled as an illustration and provided along with a disclosure statement.
The illustration must be complete, list any relevant costs or fees, and describe any riders or other optional features and explain whether the optional features are included in the illustration.
For an indexed annuity, an illustration showing non-guaranteed values must show the performance for the most recent 10 years, the worst 10-year period in the past 20 years, and the best 10-year period in the past 20 years.
For an indexed annuity, an illustration must warn, “It is likely the index will not repeat historical performance.”
For other annuities with non-guaranteed components, the warning must state that, “This llustration assumes the annuity’s current nonguaranteed elements will not change. It is likely that they will change and actual values will be higher or lower than those in this illustration but will not be less than the minimum guarantee.”