InsuranceNewsNet Responds to Flaws in

Dateline NBC Report

http://www.insurancenewsnet.com/article.asp?a=top_news&id=93344

April 16, 2008

Dear Dateline,

In response to the April 13th edition of Dateline “Tricks of the Trade” about unsuitable “Equity

Indexed Annuity” sales,InsuranceNewsNet Magazine (INN ), a leading trade publication, would

like to respond to your clear lack of journalistic objectivity and integrity as a news organization.

While we agree that there are a few insurance agents practicing deceptive, unscrupulous sales

practices with “Equity Indexed Annuities,” there were far too many important facts about annuities

as a whole that were left unexplained to the viewers.

At the heart of the matter is your show’s completely biased, one-sided view of the facts, from two

of the biggest opponents of what are now called Indexed Annuities (IAs) – never once did Chris

Hansen provide an opposing viewpoint in support of IAs.

Your primary objection to IAs was surrender charges, yet you neglected to mention that IAs aren’t

the only type of annuity with surrender charges. What about traditional fixed and variable

annuities, some of which contain similar lengths of surrender periods? No mention of these

products was included in the program. Dateline also failed to mention that there are plenty of IAs

on the market today that contain surrender charges as little as one year, yet instead focused on a

16-year surrender charge product that even contained a 10% premium bonus, an important

benefit to the client.

The fact is that the amount of complaints against indexed annuity agents and providers was

grossly exaggerated in your program. Attorney General Lori Swanson’s comments that these

unscrupulous sales are happening on a large scale is unsubstantiated. According to the National

Association of Insurance Commissioners, whose mission is to protect the public interest, there

have been only 35 complaints nationally in 2008 compared to more than 1200 complaints against

the handling of other life insurance policies. IAs had very few complaints – according to the NAIC.

The point is that Dateline, like other mainstream media, has blown the situation out of proportion

to the detriment of your viewers.

Like any other sales field, there will be any number of salespeople pulling the wool over people’s

eyes. As a leading authority on life and annuity news, INN strongly opposes fraudulent sales

tactics. But by exposing these few agents, without letting the public know that indexed annuities

have one of the smallest complaint ratios in the insurance industry is just plain-old, bad reporting.

Even one factual tidbit would have made this Dateline episode gain credibility.

In response to AG Lori Swanson condemning the practices of agents in the video, it should be

stated that Swanson is part of a state system that approves the very same product which she is

condemning.

The documented truth is that for thousands of consumers, indexed annuities are a perfectly

sound, secure and successful vehicle. In the end, your story could do more harm than good

because many owners of indexed annuities may start to wonder about the strength of their

insurance product. Meanwhile, the financial markets continue to be volatile. Stocks and mutual

funds continue to suffer and yet the insurance industry is being pegged for squeezing money out

of the pockets of seniors. What about the stocks and fund investment losses that seniors

experience on a daily basis?

Here are some additional facts that are important for your viewers to understand:

• In 2005, there was only one complaint for every $260,000,000 in premium, or .1% of all

premium (Source: NAIC closed complaint files 2006, Advantage Compendium).

• According to NAFA, The NAIC Suitability Model Act, which protects consumers through

rigorous standards, has been enacted in states with approximately 87% of all annuity

business. Carriers are heavily monitoring and reviewing indexed annuity sales as a

result.

• Isn’t the fact that Dateline colluded with the Alabama State Securities Regulators to get

false licenses issued unethical? This report was not a government-sanctioned piece.

Again, INN agrees that as with all industries, fraudulent sales practices certainly occur, but in the

grand scope of all annuity sales, IA complaints are among the fewest. The benefits of indexed

annuities and the growth potential and security they offer policyholders were never addressed.

Dateline has revealed itself to be tabloid journalism, not balanced investigative reporting. In the

future, INN , in its humble opinion, recommends that Dateline provide various viewpoints. In the

end, your show did exactly what it decried in the actions of the agents. It ended up pulling the

wool over its viewer’s eyes. Now who is deceptive?

Rob Billingham

Executive Editor

InsuranceNewsNet Magazine

rob@insurancenewsnet.com

 

 

NAFA responds to Dateline investigation

The National Association for Fixed Annuities responds to press release announcing hidden camera investigation

RESPONSE

updated 12:40 p.m. MT, Sun., April. 13, 2008

Dateline NBC received the following response to this press release.

TO: Steve Eckert, Dateline Producer

FROM: NAFA, the National Association for Fixed Annuities

RE: Statement regarding Sunday, April 13th Dateline Broadcast

NAFA is in receipt of Wednesday’s press release announcing the Sunday Dateline broadcast.  NAFA strongly opposes fraudulent, deceptive and unscrupulous sales tactics used to sell individuals of any age fixed annuities and particularly older Americans who may be more vulnerable.  If there is evidence that some sales people have used unacceptable methods and have taken advantage of older consumers to make sales, that evidence should be brought to the attention of state regulators and the appropriate law enforcement agencies.  The fixed annuities industry deplores the sales methods employed by unethical agents and is taking steps to police its agency force.  It is also important to point out that these practices are not “widespread” as the press release suggests but are confined to relatively few of the thousands of agents who help Americans prepare for retirement. 

NAFA is concerned with the consequences the story could have on the thousands of consumers for whom fixed annuities are a perfectly sound, sensible and prudent component of their retirement planning portfolio.  Consumers may erroneously be left with a negative view of fixed annuities or all sales people based upon the deceptive sales practice of a few sales people.  As a result, they could react in a way that would be harmful to them especially in today’s economic environment.

The financial markets are as volatile and unsettled as most consumers have ever experienced.  Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernake, among others, are trying to help financial institutions strengthen their balance sheets and restore confidence with investors. The stock market is extremely volatile, and the bond markets are fragile with very little activity and questions about the actual market value of many securities.  The Bear Stearns debacle underscores the uncertainty that exists in today’s market environment.

Also, many annuity policyholders are in the same demographic group that buys certificates of deposit, which are FDIC insured but with only $100,000 of FDIC protection. They need more security since they are not typically stock market investors. Fortunately, annuities are covered by most state guaranty funds, although the industry is not allowed to advertise that fact. One of the biggest issues with investors and savers right now is where to safely put money. There is a myth that money market funds are guaranteed but most aren't. The bond mutual funds are difficult to price in some cases. Stocks are always volatile investments and are more so now.

Seniors are particularly vulnerable to harmful consequences that could result from overreaction to your story because they no longer have the ability to earn income necessary to compensate for investment missteps.  It is important that consumers are aware of the benefits of fixed annuities as well as to be cautioned about sales practices that could lead them to an unsuitable or inappropriate product.  Annuities generally provide all of the insurance coverage of traditional insurance products, including death benefits, withdrawal options, payout options and benefits triggered by disability or incapacitation. This protection alone does not mean that the product is suitable for all consumers or even all of a consumer’s savings, but an annuity is and can be suitable for some retirees or some of a retiree’s savings.

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