variable annuity sales : The Boom Fades

2008-04-28 12:08:27

( Insurance )



For about a decade, variable annuities have been a high profile retirement savings product – not only have variable annuity sales been high, but the controversy surrounding them (whether met life annuities or any other) has been hot. Variable annuity life insurance faces more and more scrutiny and complaints.

And there is no sign of the controversy lessening. With variable annuity sales plummeting with falling stock markets, regulators are paying increased attention, and unhappy annuity owners are filing lawsuits.

For the insurers this is bad news. They had put high hopes in profits from what seemed to be the unbridled growth of sales of this retirement savings vehicle – which became so popular a decade ago. Others are happy about the drop in annuity sales. From the point of view of many financial planners, the fewer people owning variable annuities, the better.

Certain financial planners believe that variable annuities only suit the wealthy.

Many people who invested in them feel they were deceived about the cost and nature of annuities.

What makes them even angrier is that it’s hard to get out of them without having to pay in a lot of money.

And what do industry proponents who defend variable annuities say? An excellent retirement saving offering, tax deferment and flexibility principal protection if you die when the stock market is low.

They claim it has special features which other investments don’t have and are fighting the lawsuits. Their case? Annuities are appropriate for retirement plans due to the death benefit protection offered.

As a result of all this controversy regulators are taking a careful look at variable annuity sales.

Recently a probe was launched into annuity sales after years of neglecting the issue.

What did they find? Many companies had exaggerated the advantage of variable annuities – neglecting to dismiss the disadvantages. They didn’t make it clear that annuities were an insurance product. Some companies attempted to prevent unsuitable sales while others failed to do so.

In February 2001, 4 companies were found to have improperly marketed and sold variable annuities. In fact the fines were minimal – but other companies realized that they were being watched.


All rights Reserved © Tradenet Services srl
Do not duplicate or redistribute in any form.