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History Doesn’t Repeat When You Compare Annuities


According to the National Underwriter article “NAIC Panel: History is Just History” by Allison Bell, history is unlikely to repeat itself in regards to annuities.  The National Association of Insurance Commissioners’ Life Insurance and Annuities Committee is working to revise the way that illustrations that compare annuities are shown.  They have what they call an “exposure draft” to revise the Annuity Disclosure Model Regulation.  An exposure draft is one step in the process of revising a model.  Comments will now be reviewed on the proposed revision regarding illustrations.

“Section 6” is the proposed change and it would require illustrations to be clearly labeled and include a disclosure statement.  All costs, fees, riders, and optional features have to be included in the annuity illustration.  For example, illustrations of the non-guaranteed amounts related to fixed indexed annuities have to not only show the history of the past ten years, but also the best and worst ten year span over the past twenty years.  The NAIC has determined that it is not likely that history will repeat itself when you compare annuities.  Disclosures have to let investors know that while illustrations assume that history will repeat itself, it is likely that history will not.  Returns may be higher or lower than the illustrations show, but they probably won’t be the same.

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