Equity Indexed Annuities Get Name Change

By on November 29, 2010 at 8:43 am

It seems that the insurance industry is not fond of the name “equity indexed annuities.” They dislike it so much that they are gathering two hundred thousand signatures to get the name changed, including signatures from every CEO involved in the business. If the change goes through, it could end up costing costumers quite a bit.

An annuity is an investment that guarantees an equity-like return without the negative risk factors. Despite the fact that the SEC and FINRA refer to these products as equity indexed annuities (EIA), the insurance industry insists that the proper name has been “fixed index annuities,” for over ten years.

Some of the claims of the industry regarding EIAs are that nobody who has every bought such a financial package has ever lost money because of declines in the market. They often claim that they are comparable to a Certificate of Deposit, which is somewhat overzealous in that this means the insurance industry is comparing itself to the US government. In some cases, they also make false claims about the liquidity of the money in EIAs, saying that it is easy to get the money out when you need it. However, if more than ten percent is withdrawn, massive penalties are incurred.

The reason for the name change is the fact that the industry wants to re-brand the financial practices. Part of the reason for this is that annuities have received quite a bit of negative attention in the press. They are responding to this attention by changing the name of some of the products.

Critics claim that the industry would have a great deal more success if they started changing the products instead. They claim that the industry simply is not open enough, and that the financial packages are too complicated for most people to understand. In fact, they claim, most of the people who are selling the products don’t even understand exactly how it is that they work.

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  • Roger

    There is more liquidity in a fixed annuity than in a CD. Also, you are correct, the annuities are backed by the assets held by all admitted carriers in the state, while bank accounts are backed by a bankrupt deposit insurer, the FDIC. Because the FDIC has access to the printing press they banks they regulate are able to get away with the sloppiness that led to the financial meltdown. Insurance carriers have a financial incentive to be more responsible as they are their brother’s keeper



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