With the myriad of indexed annuities on the market today, my question to fellow agents is:
If you were going to purchase an indexed annuity for yourself, who would you go with and why? Let's say 50k in a 5-10 year annuity.
What I actually bought for my wife was an Allianz MasterDex 5 plus. With the income rider, it guarantees not only growth with a minimum guarantee, but the income itself is indexed once you start taking income. A very attractive product, on the whole.
I guess it all depends what your trying to accomplish. The majority indexed annuities I've sold are clients looking for tax-deffered accumulation with as much upside potential as possible. I like the annual pt-to-pt stuff and use ING Envoy 9 a good deal. It's not the highest payouts in the industry, but if the client has the above needs, from what I've seen it's one of the best options out there (and I've yet to see a product that has the highest payouts and is also the "best option for the client). I never got the chance to use RBC's Dow 10 before the company discontinued it last month, it looks like that was a very good product in its day. Allianz's caps seem to have fallen a bit as of late, probably since Aviva has all but backed out of the market they now feel they don't have to give away the farm to compete.
To answer your question, if it were me buying one of these for myself I would be looking for the highest market partipation-especially where we are currently with Dow 8500. That could be accomplished with participation rates, caps, spreads whatever....again I would just want the most market exposer as possible. After that, the next thing I'm looking at is the companies financial strength rating. We all know that indexed annuities have many moving parts, I don't want to have one of these with an insurer on shaky ground....to the contrary I would want to buy the one with the most solidly rated company I could find.
When it comes to an exhaustive list of all the companies you may want to look at I would suggest you pm insuranceexec
The Jackson National AscenderPlus Select with monthly sum option is a good one for those who want to guarantee the principle while still allowing for a nice return in a good market year. Right now the caps on a 10-year with $100k+ investment are 2.35% per month, so you could potentially get a 28.2% return in a single year if the market went up every month. That's not a very likely scenario, but the potential is there. However, if the market has one month where it drops 28%, you just lost any potential gain for the year. A little more risk with a little more reward, but still has the underlying guarantees. We don't sell a ton of annuities, but I'd be pretty careful of selling annuities from A or A- rated carriers. I'd rather not test out that E&O insurance in the future if possible.
The Jackson National AscenderPlus Select with monthly sum option is a good one for those who want to guarantee the principle while still allowing for a nice return in a good market year. Right now the caps on a 10-year with $100k+ investment are 2.35% per month, so you could potentially get a 28.2% return in a single year if the market went up every month. That's not a very likely scenario, but the potential is there. However, if the market has one month where it drops 28%, you just lost any potential gain for the year. A little more risk with a little more reward, but still has the underlying guarantees. We don't sell a ton of annuities, but I'd be pretty careful of selling annuities from A or A- rated carriers. I'd rather not test out that E&O insurance in the future if possible.
Are you insinuating that by writing an "A", or even an "A-", rated carrier that it would constitute an E&O claim?
Thanks for the feedback everyone. I was using the Aviva products primarily until they took a breather. I am now leaning toward Allianz. They were out of favor for sometime based on their payouts at passing clause, but have since become more client friendly in my opinion.
I too am curious about the A/A- rated debate. Jackson has a good rating, but their indexing methods are not that attractive. What makes you think an A insurer is going to cause anyone problems?
Are you insinuating that by writing an "A", or even an "A-", rated carrier that it would constitute an E&O claim?
I am curious; on what grounds?
Being an A or A- carrier doesn't constitute an E&O claim on its own.....but if a company goes under and the client gets screwed, guess who they're coming back to for answers. Whether you did your job and due dilligence or not, they can still make a complaint, attempt to sue, and you're stuck holding the bag trying to get your E&O to fight it. There's plenty of A+ carriers out there that the client could come back and say "why didn't you put me in this one instead?" Again, whether right or wrong makes no difference - it's all the client's perception of the situation and when someone tells you that you can't access your $250k, that perception may get a bit distorted.
I think if A or A- companies go under, and no companies are able to purchase their books of business, and no taxpayer bailout is forthcoming, then we are all pretty much screwed. At that point, no insurance product and probably no other investment will be worth as much as a box of 9mm slugs.
Being an A or A- carrier doesn't constitute an E&O claim on its own.....but if a company goes under and the client gets screwed, guess who they're coming back to for answers. Whether you did your job and due dilligence or not, they can still make a complaint, attempt to sue, and you're stuck holding the bag trying to get your E&O to fight it. There's plenty of A+ carriers out there that the client could come back and say "why didn't you put me in this one instead?" Again, whether right or wrong makes no difference - it's all the client's perception of the situation and when someone tells you that you can't access your $250k, that perception may get a bit distorted.
The same argument could be made for an A+ company as well! Must we re-hash AIG?
Every agent that sells annuities should be doing a FNA to validate the reason for the offering. Remember E&O means "Errors & Omissions"
A Professional liability claim must allege negligence in either the performance of or failure to perform Professional Services. Errors and omissions insurance policies have a specific limit of liability and usually include both legal costs and damage awards in a single limit. E&O insurance does not cover intentional, fraudulent or illegal activities or in most policies, punitive damages. (Taken from the above posted link)
I understand the same could be said with an A+ carriers, but it lessens the associated risk. Even if there is no negligence, you can still get dragged into court to have to point that out. Some E&O companies won't even cover A- carriers. Everyone is free to use whatever carriers they want, that's just my personal preference. Same reason I'd never use some of these crappy FE and GI life insurance companies.
I understand the same could be said with an A+ carriers, but it lessens the associated risk. Even if there is no negligence, you can still get dragged into court to have to point that out. Some E&O companies won't even cover A- carriers. Everyone is free to use whatever carriers they want, that's just my personal preference. Same reason I'd never use some of these crappy FE and GI life insurance companies.
Everyone is entitled to their own opinion. But to make a blanket statement like "but I'd be pretty careful of selling annuities from A or A- rated carriers. I'd rather not test out that E&O insurance in the future if possible" is not warranted.
The next time you make a statement of opinion that carries no substance preface it by saying so.
Also I am curous what E&O company will not cover A- companies?
Isn't any answer to the OP's original question going to be a statement of opinion? There is no "best" indexed annuity, only highest paying or highest caps.....doesn't necessarily make it the "best".
If you ask me, the statement does carry substance - with all the financial turmoil, agents need to be more careful than ever in what companies they deal with. I would say that it's just as bold of a blanket statement to say that all A and A- rated carriers are ok to sell. How about a carrier that was just downgraded from A to A-? What happens when your A- carrier gets downgraded to B+?
On the E&O question - I'm not sure off the top of my head. I know when discussing certain carriers with our case manager in the past (due to more favorable underwriting, etc) they stated that some of the E&O carriers will not cover products sold by A- companies and to make sure that our E&O would cover it if we did sell the product.
Isn't any answer to the OP's original question going to be a statement of opinion? There is no "best" indexed annuity, only highest paying or highest caps.....doesn't necessarily make it the "best".
If you ask me, the statement does carry substance - with all the financial turmoil, agents need to be more careful than ever in what companies they deal with. I would say that it's just as bold of a blanket statement to say that all A and A- rated carriers are ok to sell. How about a carrier that was just downgraded from A to A-? What happens when your A- carrier gets downgraded to B+?
On the E&O question - I'm not sure off the top of my head. I know when discussing certain carriers with our case manager in the past (due to more favorable underwriting, etc) they stated that some of the E&O carriers will not cover products sold by A- companies and to make sure that our E&O would cover it if we did sell the product.
Those are not statements of opinion because they can be substantiated with facts. A statement like "Which one has the highest caps?" can be found by searching all of the companies that offer that particular product. Likewise for the highest paying in commission.
It would be a stretch to say; and to have validated, that you are under more scrutiny by writing an A or A- company. How can this be validated?
E&O has its aggregate limits, and would never claim to be an expert in the E&O arena.
I would definitely agree; which is why I would never make a blanket statement eluding to the fact that all A- or better companies are exempt from financial scrutiny and E&O claims. Due diligence is and should always be used when selling any type of insurance product.
I would suggest to anyone that sells annuities to make sure that a FNA is completed prior to the recommendation of any product. I would also make sure that a record is kept, which is required for 7 years, for as long as you are in the business; but again this is my opinion.
I would also like to know the name of the E&O carrier when you get a chance.
To answer the question about E&O coverage a little. Some E&O policies will not pay on a carrier rated A- or less if you are being seud because the carrier became insolvent. They will cover you for any of the normal stuff regardless of the rating of the carrier.
I would like to point out AIG's rating before it had problems and it's current rating. A rating is not everything in my personal opinion. I agree some research on the company is prudent.
As far as the question of best product. I agree with the above. It depends on what the client needs. There is no one product that fits everyone. IT is good to have several arrows in your quiver. I suggest doing some good research picking around 3 carriers and 5 products and learn them inside and out.
Allianz
Investors Insurance Company / Legacy
RBC
ING
OM Financial
Midland National
Lincoln National
Lincoln Benefit...
Agents have good reason-apart from ensuring good relations with clients-to stay on top of their insurers' financial condition. [COLOR=Red]Most agents' E&O policies contain an exclusion that bars coverage for claims arising out of a carrier's failure to pay a claim because of insolvency, receivership or other financial difficulty. (The wording of these exclusions varies, so agents should check their policies carefully. Some E&O carriers, for example, preserve coverage if an agent's carrier had a minimum specified rating and size.)[/COLOR] Insolvency exclusions have been litigated in a number of cases around the country. For the most part, they have been upheld. The principal cases are from New York [Kleneic vs. White Lake Marine Corp., 144A.D.2d341, 533N.Y.S.2d909, 910 (1988)], Louisiana [Barron vs. Scaife, 535 So.2d 830, 832 (La. 1988)] and Georgia [St. Paul Fire and Marine Ins. Co. vs. Cohen-Walker, Inc., 171 Ga App. 542, 320 S.E.2d 385 (1984)].
Most people can probably skate through things without ever having to use their E&O even if they sell A, A-, B+ companies....but I don't want to be the guy that gets a letter from someone's lawyer wanting to know why I recommended a product from a carrier going downhill or teetering on the edge and now their client can't access their $250k/$500k/$1 mil/etc
Caps, spreads and participation rates don't mean beans unless you thoroughly understand how a particular company uses them and unless you understand how a particular market that you are indexed to will perform. Don't know how a market is going to do this coming year? Welcome to the club.
You can do this much: in a volatile market you probably are going to want to recommend an annual point-to-point rather than a monthly average type of strategy. Why? Because there will be a cap or spread upward, but no limit downward. Consequently, monthly volatility will kill the yearly result.
That is not to say that monthly averages are not "good" depending on your best guesswork. I had a client get an actual 21% gain in an indexed annuity because his particular 12 month period really shined because the S&P drifted up each month just the right amount for him to cash in.
So, how high a particular company's cap is doesn't mean anything because ALL companies get their profits by manipulating some part of the equation. Generous cap? Fine, look for where the money is coming from in some other portion of the equation --because it will definitely be there somewhere.
I prefer companies that treat customers decently across the board. I don't like MVAs and I don't like less than a 100% participation rate. I also don't like companies that play the moving cap or spread game on existing contracts. Sometimes it has to be done, but there are a couple of companies that play this to an extreme.
So which companies manipulate their caps and spreads less than others? That is really the crux of the question. Aviva was doing well for a while, but with the recent volatility and their hiatus - who has taken the baton?
So which companies manipulate their caps and spreads less than others?
Actually, I had Aviva in mind as one of the companies that plays games with existing contracts.
Allianz, on the other hand, actually has published their record on changes to caps and spreads. They have changed very little. I am not an Allianz shill by any means, but they have this much right: always 100% participation, never any MVA, and they have not historically screwed their customers with changes to caps and spreads.
You can argue all you want about other faults of Allianz, with some validity, but they have the rest pretty well put together.
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