Complexity of new indexed annuities causing concern
December 15, 2017 by Greg Iacurci
The way indexed annuities have evolved has led to concern from some corners of the insurance market, with some critics saying insurers have developed increasingly complex products in hopes of standing out in a competitive market.
While there were only six hybrid indices available for use in indexed annuities in 2013, there are more than 50 today, according to Wink Inc., a market research firm. They are the second-most-popular index, only behind the S&P 500, representing more than 30% of sales in the third quarter, according to Wink data.
Sheryl Moore, president and CEO of consulting firm Moore Market Intelligence, believes insurance agents who answer questions from clients about a hybrid index are potentially giving unregistered investment advice.
Doing so is a fairly serious offense, punishable through fees, loss of an insurance license and potentially jail time, depending on the state, she said.
“The product must not be marketed primarily as an investment, and that’s what is subject to interpretation here,” Ms. Moore said. “You’re bringing up securities in your discussion of what the product is.”