Better than Throwing Darts
June 30, 2020 by Kerry Pechter
When Kent Jacquay, a 47-year-old former insurance producer with a knack for computer programming, speaks to groups of insurance agents about selling fixed indexed annuities (FIAs) his favorite prop is a dartboard—a metaphor for how they tend to pick contracts for clients.
Click HERE to read the full article via Retirement Income Journal.
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Lots of tools are advertised on the Internet that claim to help insurance agents and financial advisers select the “best” FIA. “There are a million different software vendors trying to sell their wares to marketing organizations,” said Sheryl Moore, CEO of Wink, Inc., the annuity data and analysis firm, noting that there’s little or no regulation of them.
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Wink’s Notes:
1. Are current caps/pars/spreads being assumed for past periods? If so, this is disingenuous; option costs change over time.
2. Has an actuary validated the calculations? While some might say they have an “Annual Point to Point” indexing method, the specimen may indicate that there is averaging in the final 6 months of the calculation.
3. For hybrid indices that have an asset management charge/ spread for the bank, are those fees on the INDEX being assumed, prior to applying the caps/rates?
4. Are new business rates being assumed in all years, going forward? If so, that is fiction. We all know that the inforce rates on indexed annuities CAN and DO change.
5. The minimum rates for every indexed annuity are listed in AnnuitySpecs. Yet, the likelihood of a company dropping the rates on the products to its minimum is nominal.
5. Monthly point-to-point indexing methods DO NOT lock-in gains every month.
6. The S&P 500 has decades of history, where many new hybrid indices have none. Could an index w/ no history may warrant changes in renewal caps/rates more frequently, or more quickly, than a more established index?