Why Aren't Insurance Companies Promoting Fixed Annuities?

[insurehound]

Maybe it's me but why aren't we seeing more advertising and guest speakers on the various talk and tv shows promoting fixed annuities? With the Market in bad shape, you would think now would be a great time to heavy up on some advertising. You know the investment side of the biz would.

How many more tv/radio shows do I have to hear the same question being asked, "Where should I put my money now?" With the answer NEVER being a fixed annuity.

I'm guessing it's because the investment side of the biz has a lock with the media and the insurance side of the biz has done very little to smooze the various media outlets.

 

[tkirk97]

Bigger margins on Variable Products. I have seen more ads recently for fixed though.

 

[Charpress]

The New York Times came out with an article recently that is very favorable to fixed annuities. This is a first for them, I think.

It basically said that if you compared the S&P over ten years ending Oct 27 with a fixed annuity for the same period, the S&P actually would lose you money while the annuity would have you up a good deal.

 

[moonlightandmargaritas]

It basically said that if you compared the S&P over ten years ending Oct 27 with a fixed annuity for the same period, the S&P actually would lose you money while the annuity would have you up a good deal.

That would be great info if you'd had a crystal ball ten years ago, no?

 

[Charpress]

How about a crystal ball just 4 months ago?

 

[insurehound]

I've heard that before SFTICA...would that also be true for Banks and CDs?

 

[Charpress]

The companies with big reserves like Aviva and Allianz along with some of the other big annuity companies are the ones that go after annuity business. That is what they do.

Aviva is spending a good bit on advertising. Allianz says the are adding $30 million to their advertising budget for 2009.

Aviva has a very effective ad that just came out. I converted it to a PowerPoint slide, but it looks basically like this:

 

[SFTICA]

Banks and CD are different. There it is not a liability that has to be reserved for but it becomes inventory so the money gets loaned out on car loans and mortgages etc. and the bank keeps the spread. CD earns 3%, bank charges 7% on a car loan. Assuming the guy makes his car payments bank keeps 4% spread.

If people don't make their loan payments you get the banking problems we have now.

 

[insurehound]

Oh, I see. Maybe this is a stupid question but could one argue that the annuity side can be a safer place to save than CDs because the insurance companies need to keep reserves?

 

[Charpress]

could one argue that the annuity side can be a safer place to save than CDs because the insurance companies need to keep reserves?

That is what the *** attorney general of Minnesota used in the Dateline show to jump all over whats-his-name who used that argument in his seminar.

Yes, it's a good argument. He was slammed for pointing out that the FDIC only has 10 cents reserve on the dollar while insurance companies are required to have a dollar in reserve for each dollar of premium. This was criticized as being a "scare tactic" to sell seniors.

Well, guess what? Now the whole financial sector is in the dumper with the US going on a short track to insolvency along the lines of Argentina.

So, is it a good argument? Yes. Can it get you in trouble? Yes, but not nearly as much as a few months ago. Many of the seniors that I "scared" last year are calling now to thank me.