Last week it was quite hot in the New York City metropolitan area and keeping the oven turned off seemed like a great idea. After having seen a poster for complimentary appetizers at a tidy little Italian restaurant down the street, my girlfriend and I got dressed and slowly meandered down the hot sidewalk to get our dinner.
We had our appetites, a bottle of wine, the promise of free appetizers and each other. Despite the horrendous heat, we were rather happy. We sat pleasantly in the back corner of the restaurant, sipping our wine, discussing baseball and reality T.V. (respectively) and picked at a wonderful plate of grilled calamari.
After we finished our entrees and asked for the bill, I realized that the advertised free appetizer was anything but free. I inquired with our waitress who in turn conferred with the management. She came back with a simple answer: “Due to financial circumstances we have to renege on our advertised offer.” OK. Although I got over paying the 10 bucks for the dish rather quickly, that seems pretty disingenuous; it would not be a tough task to have someone from your establishment take down the posters that you have advertised all over town touting free appetizers.
But, why would they want to do that? What they advertise gets people in the door and once they are in, the ownership can treat them however they like. This brings me to the recent state of the annuity industry, which is disastrous.
Several insurance companies as of late are offering their variable annuity owners buyouts or insisting that they move into investments with lower returns. This is happening because, like the restaurant, when things are going well, companies tend to overpromise and, in the case of the Italian bistro, when business is down, and they can’t live up to their end of the deal. Insurers are battling a protracted low interest rate environment, regulatory vagueness and an anemic overall economy. They cannot live up to the generous income and death benefits they promised.