So.....
Since Bills and Bonds are a security, am I to assume a traditional annuity duck is also a security. A traditional annuity has to invest the money in something and bonds and bills are often favorites. To keep with the SEC logic, any growth in a traditional annuity, that is above the guaranteed value is investment risk and needs to be governed by the SEC.
Anybody selling traditional UL policies? Do those UL policies usually try to pay a higher return than gauarantted interest on the non forfeiture values? I'll answer yes but these days...who knows. So using the SEC logic, the UL could also be a security because the UL policy owner bears the risk for non forfeiture growth.
Insurance companies invest money in the equities markets, that is what they do. Yes there is real estate investing but I think that is more for reserves, surplus requirements, etc. So is the SEC telling insurance companies that, to stay an insurance product there can be no equities market investing?
The SEC has basically said to the insurance company you can invest in bonds and bills but nothing else. Is part of their logic that FIA owners are told what is used by the insurance company to base their FIA returns upon? It has been a while since I read a traditional annuity contract but I don't think they show all the calculations that go into creating the growth values. They may say that it is based upon bonds/bills but do they give the complete algebraic expression that is used to create the return?
So if it is not ok for FIA's to invest in the market how long will it be until traditional annuities are not allowed to invest in bonds/bills.
Compare the FIA to a traditional and what is different:
FIA - has surrender charges
Trad- has surrender charges
FIA- hopes to have growth higher than guaranteed
Trad-hopes to have growth higher than guaranteed
FIA - returns are based on equities market products
Trad-returns are based on equities market products
FIA-no loss on contract if there is no growth on insurance invested money
Trad-no loss on contract if there is no growth on insurance invested money
So I ask you.....where is the FIA "market risk" that the SEC has conveniently created that is different from a traditional? Risk involves loss, a hazard or chance of loss, degree of probability of such loss. Since contract values in an FIA (all that I have seen) do not drop, where is the risk?
I think it is all because the insurance companies put too much transparency into the products for people to see. Does the SEC consider those convoluted mutual fund to be transparent? I guess the SEC will be happy when those 50 page, informative, prospectus needs to be handed to a customer.
In the 20 years I was involved (licensed) in the equities market, guess how many people read the prospectus I handed to them?
Aside from sitting there and reading it to them, from engineers to CPA's, I don't think there was one that read the entire thing. Most of them went straight to the round file.
Get the government involved and it all goes crazy. Take the Medicare Advantage enrollment. Who, aside from the government, calls a telephone enrollment a "telephonic" enrollment. They can't even use the simple term for telephone. Why in the world did the government say, hey lets have an annual enrollment period from Nov 15 to Dec 31st. It is the time of the year with two major holiday's, elderly are extra busy , people will be off on Christmas and Thanksgiving breaks...yep a great time of year to do enrollments. Add to that all the rules for setting appointments and you just have to say...WTF were they thinking?
They weren't thinking! Most of the government wonks do NOT understand the real world. Sometimes it takes people a long time to realize the government is most often screwy? Many just out of college people have that youthful exuberance and belief that government is to help them. Kind of like their parent helped them. Funny thing is that many of those exuberant kids, as they start cruising through their 30's will start to change their attitude, especially if they are self employed.
We are now sitting in one of the greatest economic declines in the past 100 years. The government's Freddie / Fannie mortgage program helped to lead us here. The Federal Government experts are the one's that got us to where we are and anyone that is willing to let the Federal experts take over insurance are
IMO insane.
Maybe you need a securities license to sell P&C. In a soft market, premiums may be lower because of the returns the insurance company is earning in the stock market. When the market turns hard, a downturn in the stock market can be part of it. I guess we can't explain reasons soft/hard markets to clients. Underwriting is also part of the equation but underwriting manuals don't often change.
Rant over.....................
Originally Posted by healthagent
sec: so, whatcha got there
Insurance: it's a blue tamaroon
Sec: looks like a duck
Insurance: it's not a duck, as you can see, it's blue
Sec: ...ummm, you took a duck and dyed it blue. Got a gaming license to sell that duck?
Insurance: we don't need a gaming license since it's not a duck. It's a blue tamaroon
Sec: there's no such thing as a blue tamaroon. You took a duck and dyed it blue
Insurance: still, it's blue. Go look up a definition of a duck and see if you find any blue ones - hence it's no longer a duck
Sec: it's still a duck, even if you dye it blue
Insurance: no -by the mere fact of dying it blue means it's no longer a duck
Sec: you're a lunatic
Listening to the insurance carriers defend this is a bit like watching a Monty Python movie: "I just chopped your arm off." "No you didn't."
Indexed Annuities - SEC Drops the Other Shoe
Linear Mode
