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Sen. Elizabeth Warren. Credit: Bloomberg

Life Health > Annuities

Sen. Warren Asks Insurers About Life and Annuity Sales Incentives

By Allison Bell

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Sen. Elizabeth Warren is continuing her fight against incentives that might influence what kinds of life insurance or annuity products that agents, brokers and advisors sell to consumers.

The Massachusetts Democrat today announced that she has sent letters to the 15 biggest U.S. annuity issuers to ask about use of cash bonuses, trips, jewelry, electronic devices and other perks to influence producers’ advice.

Her letter includes references to promotions for term life insurance and indexed universal life insurance as well as products such as multi-year guaranteed annuities.

She is asking each company to provide a list of the incentives awarded to producers and distributors.

She is also asking for copies of incentive program fliers and copies of insurers’ incentive program disclosure policies, along with a “list of any lobbying activity by your company” related to the Labor Department’s new investment advice fiduciary regulations.

What it means: Warren intends to keep up the pressure on annuity issuers.

Warren: Warren led efforts to create the Consumer Financial Protection Bureau. She has long been a critic of what she believes to be anti-consumer financial services company practices.

She highlighted concerns about annuity sales incentives in a 2015 report, as the Labor Department was developing an earlier version of the fiduciary standard regulations that eventually died in the federal courts.

Labor Department officials refer directly to Warren’s reports in their discussion of the compensation disclosure provisions in the preamble to the new investment advice fiduciary regulations.

Warren, who is running for reelection, also is working on many other issues, including student loans and concerns about ransomware at health insurers and other companies.

The Labor Department: The Labor Department appears to be warmer to paid travel and sales incentives than Warren is.

The department said in the preamble to the main final rule that insurers and distributors cannot use noncash incentives to encourage producers to steer retirement savers planning rollovers toward certain products.

But companies can pay for training trips, and they can set minimum sales standards for the participants, officials said.

“Properly designed incentives that are simply aimed at increasing the overall amount of retirement saving and investing, without promoting specific products, would not violate the policies and procedures requirement,” officials said.

The ACLI Response: Susan Neely, the president of the American Council of Life Insurers, said in a statement that Warren’s letters ignore the protections that federal and state regulators have established in recent years and the needs of workers and retirees.

Forty-five states have adopted annuity sales standards based the National Association of Insurance Commissioners’ suitability standard model regulation update, and that update imposes limits on noncash compensation, Neely said.

“These limits directly address the conflict of interest concerns raised by the Labor Department in 2015,” Neely said.

For products classified securities, including registered indexed-linked annuities and other variable annuities, FINRA also restricts use of noncash compensation, Neely added.

“The most valuable type of noncash compensation that many financial professionals receive is health and welfare benefits,” she noted.

“The NAIC model, along with the SEC’s Regulation Best Interest, tightened rules involving annuity sales while ensuring the product — the only one in the marketplace guaranteeing lifetime income like a traditional pension — remains accessible,” Neely said. “Consumers working hard to set aside retirement savings and make it last are not served by misinformation about state and federal restrictions on noncash compensation of financial professionals who offer annuities.”

Sen. Elizabeth Warren. Credit: Bloomberg

Allison Bell

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