Idaho Annuity Law Spurs Industry ‘Paranoia,’ Regulator Says

By John Hilton

While nobody wants to claim credit for it, a new annuity law in Idaho sets out some creative restrictions that are attracting controversy from within the industry.

The bill was introduced in February and quickly passed the heavily Republican Idaho Legislature and was signed by Gov. Brad Little, R. It took effect July 1 and includes three main components:

Introduces new annuity sale disclosures and timelines for delivery of those documents.
Limits surrender periods to 10 years max, and bans annuities with surrender charges that exceed 10% in the first year and decrease by 1% per year.
Requires all indexed annuity advertising to be pre-approved by the Department of Insurance.

"I think it has caused some, 'paranoia' is the word I would use, among some in the industry," said Idaho Insurance Commissioner Dean Cameron. "There are a few things that were interestingly worded."

Where the bill originated from is in dispute. Cameron claimed the bill sponsor brought it to his office "and we didn't object to it." That legislator, Rep. Rod Furniss, R, said the insurance department came up with the legislation and sought his support.

Furniss is a chartered life underwriter, past president of the Idaho Association of Insurance and Financial Advisors. Furniss has 35 years of experience in the financial services industry, has sold a couple fixed indexed annuities, and said he supported the bill.

"We were seeing some abuses in the sales industry," he said Monday. "We were starting to see some contracts that have extended surrender charges in them and people probably weren’t understanding the different caps and things that were available to them."

'The Most Consternation'

There were concerns over advertising promising unrealistic returns, Furniss added.

"We were seeing some return on investments that weren’t much better than fixed annuities," he explained. "A lot of the people had expectations that they would get an 8% or 9% rate of return when in reality they were getting 1% to 3%, or 1% to 4% return."

The advertising oversight is causing "the most consternation among the industry," said Cameron, a former state senator and third-generation life insurance agent.

"I’m not sure why," he said. "It almost raised some question marks for me because it was almost as though they protested too much. So there’s a wonder -- what is it they are sharing with the agent and telling the agent they don’t want to get into the consumer’s hands that they are concerned about sharing with us?"

Reached by phone, Furniss was surprised by Cameron's comments. There have been no complaints that he is aware of, the lawmaker said, and no industry groups lobbying for changes.

Furniss added that he would be "very surprised" if any advertising were to be rejected by the department.

"I don’t think that we’ve gone overboard on the advertisements," Furniss said. "In Idaho, we’re like the wild, wild west. We don’t go out to protect the consumer much."

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.