FIA Complaints Continue To Be Very Low
By Jack Marrion
In 2012 there were 54 fixed index annuity closed customer complaints...
or the equivalent of one complaint for every $633 million in sales...
or roughly one complaint for every 9,300 sales...
or out of the roughly 3.4 million people that own an FIA (a very rough estimate) 99.998 percent did not file a complaint.
FINRA and the Securities and Exchange Commission (SEC) recorded more 15,000 customer complaints in 2012 – index annuities had 54.
It hasn’t always been this way. The annual study conducted by Advantage Compendium shows that complaints against index annuities leaped in the middle of the last decade as index annuity sales more than doubled. The responses to the increase were new suitability standards and agent training. The result has been markedly fewer complaints even though index annuity sales continue to grow.
Compare this to FINRA ,where customer complaints caused 5,100 examinations in 2012 resulting in $68 million in fines (http://www.finra.org/newsroom/newsreleases/2013/p197624) or the 10,317 complaints the SEC recorded last year simply for the 10 most common complaint areas (http://www.sec.gov/news/data.htm). The numbers clearly show that the FIA industry can take off the hair shirt that some Henny Penny regulators and yellow journalists have tried to cloak it in. Index annuity agents generate very, very, very few complaints, apparently because they have nothing to complain about and shame on anyone who says differently because the results loudly and clearly speak for themselves.
Comments and Caveats
I find there were 54 specifically coded index annuity complaints. National Association of Insurance Commissioners (NAIC) reports 58 in their “Complaints By Coverage Type.” The reason for the difference is I tally the actual complaints percarrier for only carriers that sell or have sold index annuities. The NAIC totals include miscoded index annuity complaints against carriers that do not offer index annuities. However, my numbers are not 100 percent accurate either. It appears there were six annuity complaints that were miscoded as variable annuity complaints (because the index annuity carriers with these complaints do not offer variable annuities), and if some or all of these were included, the average sale per complaint would drop. But a dozen other index annuity carriers also offer variable annuities and it is probable some of their index annuity complaints should have been coded VA. These closed customer complaints cover the gamut from fraud to delays in policyholder services. Although the complaints are closed, I am unable to determine how many were resolved in the carrier or agents’ favor. The database relies on voluntary reporting from the state insurance departments and may not be thorough. In addition, this does not include index annuity complaints filed with securities regulators.
* The National Association of Insurance Commissioners (NAIC) gathers data on closed customer complaints from all of the state insurance departments. This information is available on the Consumer Information Source part of their website https://eapps.naic.org/cis/ on a per company basis and is not comprehensive.
Dr. Jack Marrion is president of Advantage Compendium, providing research and consulting services to industry leaders. He also serves as director of research for the National Association for Fixed Annuities and serves as a research fellow at Webster University.
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