Top 5 Stories Of 2019: Annuities And Lawsuits

By John Hilton InsuranceNewsNet

Once again, the regulation of annuities made for popular reading in every month of 2019.

It's not surprising that lawsuits and regulation were the most-read annuity topics on InsuranceNewsNet. Otherwise, readers were naturally interested in annuity sales rankings, among other topics.

Here are the five most-read annuity stories of 2019:

AIG Retakes Top Spot

For the first time since 2007, AIG Companies reigned as the top seller of annuities according to LIMRA Secure Retirement Institute in a January 2019 story.

Aside from a new sales leader, there were two new companies in the year’s top five compared to 2017 sales. The top five sellers of total annuities in 2018 representing 32 percent of market share were AIG Companies, Jackson National Life, New York Life, Lincoln Financial Group and Allianz Life of North America.

FIAs Reign Supreme

In this January story, Sean A. Ruggiero, president and founder of SafeMoneySmart.org, explained where FIAs win over stocks:

FIAs guarantee that the principal will never receive negative interest crediting due to market decline. What do mutual funds guarantee? Many mutual funds only guarantee fees, such as annual expense ratios and 12b-1 fees, but I’ve never seen a mutual fund guarantee that it won’t lose value in a down market.

In addition, many of today’s FIAs offer something called “volatility-controlled indexes,” which can do a great job of capturing these swings and smoothing out returns. These proprietary index options can be purchased over the counter, not through the Chicago Board Options Exchange, so they avoid commissions and gain even higher participation for the consumer.

Annuity Rules Move Ahead

A key National Association of Insurance Commissioners' committee put its tentative stamp of approval on a strengthened suitability in annuity transactions model law.

The Life Insurance and Annuities Committee met in Austin, Texas at the NAIC Fall Meeting. The committee adopted the text of the annuity sales model, which adds a best-interest standard to all annuity sales.

The Annuity Suitability Working Group worked on strengthening the annuity sales model for more than 18 months before voting to finalize it Nov. 5.

Lawsuit Targets Indexes

Three consumers filed a class-action lawsuit alleging that Security Benefit Life Insurance Co. defrauded consumers by implementing a “fraudulent scheme” involving a proprietary index used in two fixed indexed annuities.

The plaintiffs, from Illinois, Arizona and California, where the suit was filed Oct. 16, claim the company misrepresented returns. The plaintiffs later asked the court to terminate the lawsuit.

Regulators Open Up AG 49

New IUL products featuring "multipliers" or "bonuses" prompted the IUL Illustration Subgroup to consider changes to Actuarial Guideline 49. The National Association of Insurance Commissioners' subgroup held several conference calls on the topic in 2019.

Some produced highly charged comments, including a July call in which a New York regulator called for a total rework on the illustration model.

"We have consumers out there being misled by these illustrations," said James Regalbuto, deputy superintendent for life insurance at the New York Department of Financial Services. "They’re fixed life insurance products showing rates of return that rival securities and I think we fail to appreciate how defective AG 49 is currently. None of the assumptions that underpin AG 49 really hold any water."

Regalbuto called for "a total rework of AG 49 from the ground up." AG 49 was finalized in 2015 to provide insurance carriers a more uniform method for calculating maximum illustrated rates on IUL products.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.