Issues with Fixed Index Annuities
Marketing materials for these new complex proprietary FIAs often show annual returns up to nine percent each year in personalized 10-20 page illustrations, but do not clearly explain that the performance is hypothetical using the benefit of hindsight and back testing. In reality, we have seen that after the 2-5 year strategy term, most pay zero percent. Often, complex proprietary FIAs restrict the potential for earning by setting caps on annual gains and/or excluding dividends from the calculation of payouts thereby limiting what consumers can earn even if the particular index performs extremely well.
How do we fix the problem?
The complexity of complex proprietary FIA contracts, the deceptive marketing techniques, and the fact these products are often based on exotic indexes make it imperative Arizona and other regulators act immediately. Regulators must protect seniors from the deceptive marketing practices employed by these new, complex proprietary FIAs. Iowa has enacted regulations prohibiting the sales of complex proprietary FIAs and the New Jersey Attorney General has fined individuals for marketing potentially inflated misleading and confusing performance calculations.
Legislation
Bill: SB 1534
REFERENCE TITLE: fixed-index annuities; disclosure; indexing
Introduced by Senators Brophy McGee: Boyer, Bradley, Gowan, Gray, Leach, Navarrete, Otondo, Quezada; Representatives Bolding, Cano, Chávez, Hernandez A, Jermaine, Meza, Terán, Thorpe
AN ACT AMENDING SECTION 20-1242.02, ARIZONA REVISED STATUTES; AMENDING TITLE 20, CHAPTER 6, ARTICLE 1.2, ARIZONA REVISED STATUTES, BY ADDING SECTION 20-1242.06; RELATING TO ANNUITY DISCLOSURE.
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