I’m pleased to share this guest post from Marc Montini, Shurwest’s Chief Marketing Officer.
The NAIC recently announced plans to add tighter regulations on illustrations used for the sale of fixed index annuities.
Marc Montini
While we usually recoil at more regulation, in this case it’s a welcome move. Misleading illustrations damage the credibility of our entire industry. And if we live by the highest standard, we want everyone else to, too.
At Shurwest, we see a number of issues with our competitors’ illustrations on a daily basis. Most insurance companies don’t provide software to illustrate their products. That leaves it to the IMO, or even the agent, to create their own method of illustration.
Many of these illustrations are outright wrong. They’re typically based on outdated crediting structure. I recently saw an American insurance company’s approved handout that showed a 12-year performance, yet clearly stated that the product and crediting structure is no longer available. How can an insurance company solicit the sale of an annuity using data that looks nothing like the product and crediting structure that is actually being sold? Misrepresentations like this ignite additional regulation and could potentially reignite 151-A.
Fees are another feature often misrepresented. Income riders have fees. Often those fees will erode principle if the index is negative. (Don’t worry, BAA and BPA fees never erode principle—no gain/no pain.) Yet you will never see that on most illustrations. They’ll show the original premium staying level and the income value compounding when, in reality, their product works much differently. There is either a gain or there isn’t a gain. If there’s no gain, that original premium should be shown to decrease compensate for the fees or it’s a misrepresentation (unless of course you are selling one of our products where this is never an issue).
The moral of the story is to be careful. Just because your client sees something in print, it doesn’t mean it’s legitimate. It’s your name on the application, and you’re the one they’re going after if there’s a problem. Call your Shurwest Marketing Consultant if you are uncertain about the illustration another IMO has sent to you. You know we’ll be honest with you and will point out anything that may be misleading…and could lead to you getting a call from the state.
As always, thanks for your commitment to operating at the highest ethical level. That’s why we have a successful partnership and will continue to, despite how others in our industry may operate.
