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Insurance News Net
Responds to Flaws in
Dateline NBC Report
April 16, 2008
Dear Dateline,
In response to the April 13th edition of
Dateline “Tricks of the Trade” about unsuitable “Equity
Indexed Annuity” sales
Insurance NewsNet
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
Click here for printed version
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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