Keep feds out of fixed annuities
September 8, 2010 by Wendy Waugman & Esfand Dinshaw
By Wendy Waugman & Esfand Dinshaw
Iowa’s insurance industry has helped build the state’s economy over the decades, constantly reinvesting in the communities it calls home.
Tens of thousands of Iowans work at insurance companies, and hundreds of thousands from all over the nation turn to Iowa-based insurance firms to protect their long-term financial security.
Iowa’s congressional delegation understands the important role insurance companies play in our economy. That’s why Iowa’s members of Congress, led by U.S. Sen. Tom Harkin, worked to add a measure in the recent federal financial reform bill that would protect the state’s insurance industry.
The provision they helped pass ensures that fixed indexed annuities, or FIAs, are under the control of state insurance commissioners, not the federal government.
The U.S. Securities and Exchange Commission (SEC) made a troubling attempt to regulate FIAs, even though these products already are strictly regulated by states.
Fixed indexed annuities have been regulated as insurance products since their inception. That means state insurance commissioners, such as Iowa Insurance Commissioner Susan Voss, ensure that consumers are treated fairly.
FIA’s are a crucial element of retirement plans for an increasing number of Americans. They offer a minimum guaranteed interest rate to contract owners, thereby reducing risk of losing principal. In addition to the minimum guarantee in the contract, owners may link their contract value to an external stock or bond index. This allocation gives the owner the opportunity to earn more than the minimum guarantee if the stock or bond index increases in value. At no time does the owner of an FIA lose credited interest or risk losing money due to market volatility.
Regulation by the SEC would have meant that insurance agents would need to obtain a securities license in order to offer these products to their clients. That would be a significant financial burden for small businesses that would have had to license their agents. If small businesses decided not to take on that cost, it would mean consumers lose access to these particular financial products, especially in rural areas.
It also would mean the loss of billions of dollars of revenue for Iowa insurance companies, potentially resulting in many hard-working Iowans’ jobs being in question. Iowa is the leading state in the nation for origination and creation of FIAs.
Iowa needs to be vigilant against a federal takeover of FIA regulation. Iowa jobs depend on it.
Wendy Waugaman is the CEO of American Equity Investment Life Holding Co.; Esfand Dinshaw is the CEO of Sammons Financial Group.
