Investors might think index funds are a great way to capture market returns. Most index funds charge practically nothing: One of the largest, Vanguard Total Stock, charges just 0.04% a year; the average stock index fund’s expense ratio is down to 0.09%, less than a dime for every $100 invested. That has dropped from 0.27% in 2000, according to the Investment Company Institute, the fund industry’s lobbying group.

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Another pool of high-fee funds sits in variable annuities, insurance contracts that hold stocks, bonds, or other financial assets in “sub-accounts.” Industry-wide, these sub-accounts hold more than $106 billion in index funds with expense ratios averaging 0.59%, according to data from Morningstar. That’s partly because these funds don’t have to compete against low-cost versions that investors may buy outside the insurance wrapper, says Todd Cipperman, founder of Cipperman Compliance Services, a financial consulting firm based in Wayne, Pa.

Funds in annuities can be packed with “trailing commissions,” fees that compensate brokers for selling products, says Jeffrey Cutter, a financial advisor in Falmouth, Mass. “People’s chins are on the floor,” he says, when they find out the total costs in annuities, which can add up to nearly 6% in administrative and fund expenses.

Another factor: Insurance salespeople must provide investors with reams of disclosures, including fund prospectuses, when they sell a variable annuity. But the prospectuses are complex and voluminous, running hundreds of pages, and fees may be buried deep within the paperwork. “The problem is there’s so much disclosure that people get overwhelmed, and it becomes less than clear what the fees are,” says the compliance expert Cipperman.

The Securities and Exchange Commission recently proposed rules to allow insurance carriers to provide investors with summary prospectuses. But providing summary prospectuses would be voluntary, and the new rules wouldn’t do anything to address underlying fund fees. “They can still charge whatever they want so long as they don’t breach their fiduciary duty that the fees aren’t too high,” says Cipperman.