This may be more about illustrations than performance, folks
April 18, 2023 by Sheryl J. Moore
Here is some more on that case we discussed earlier this week, about the insurance company and index provider, who are being sued because of hybrid index performance. Click to read Texas lawsuit: Lincoln Financial annuity fell far short of illustration promises
Some things that caught my eye:
“Plaintiffs say they signed a fixed indexed annuity contract with [the carrier] in February 2020 expecting the consistent 6% gains [the] illustrations showed.”
“The plaintiffs say their actual returns were zero or near-zero for several years.”
“The lawsuit further claims that plaintiffs’ funds were moved out of the index and into Treasury securities after the market collapsed briefly in March 2020.” It then goes on to say, “the plaintiffs’ funds were ‘never moved back to a blend of dividend stocks and bonds as disclosed until later in 2021, if ever…'”
A second lawsuit, against a different carrier has recently come into the news as well.
Interesting.
John Hilton from InsuranceNewsNet points out-
“…plaintiffs say [the second carrier] manipulated clients to invest most of their fixed indexed annuity account values in the company’s synthetic index, which performed far worse than portrayed.”
This is the third lawsuit that I have seen about hybrid indices not performing as illustrated/expected, since 2018.
Hybrid indices were first introduced in 2012, and have rose in popularity since. Total sales of indexed annuities allocated to hybrid indices reached a high in 2021, with $37.7 billion in sales. The indexes have started to come under fire, as returns have been less than stellar recently.
I’ve put a lot of thought into this. If indexed annuity allocations were to the S&P 500 index, and they didn’t receive indexed interest for several years, would someone be suing the insurance company and S&P Dow Jones indices?
This may be more about illustrations than performance, folks. Would these lawsuits have even been filed if unrealistic expectations were not presented to the annuitant?
What do you think?
SN: EXTREMELY frustrated with the fact that the National Association of Insurance Commissioners (NAIC) doesn’t seem to give a flying fig about indexed annuity illustrations. -sjm