The SEC Rules Indexed Annuities Are Indeed Securities; Which Companies Will Now Leverage the Obama Success Model?
Nothing happens in a vacuum. If it weren’t for Dateline NBC it’s very likely that the SEC wouldn’t have voted today to characterize indexed annuities as securities. You’ll recall Dateline’s “sting” operation featuring hidden cameras and shills posing as annuity prospects. In the post-Dateline environment the SEC apparently could not fail to act. Chairman Cox, after all, kicked-off the Commission’s June 25 open meeting by playing excerpts from the Dateline program. For all practical purposes the mass media exposure of annuity sales practices sealed the fate of indexed annuities as fixed contracts- death by video.
On June 26 I stated that the indexed annuity business would grow in spite of the SEC’s action. I still see it the same. Once again, today’s events are not taking place in a vacuum. The meltdown in the equity markets has driven investors to seek safe money alternatives. The big question for the future of indexed annuities is how product providers choose to respond. Will their worldview change?
Product providers that embrace consumer-oriented contract designs, transparency, innovative marketing technology and quality investor education will be nicely positioned for growth. Such companies will capitalize on the demographically-driven movement of money that craves principal protection combined with upside growth potential. Talk about a perfect context for sales!
Make no mistake; it will take more than a “tweak” to the insurer’s business model. Companies that lead in the next months and years will have seen the need to offer new types of value to both investors and distributors. They’ll race ahead of competitors who cling to the tactics and strategies of the past. They’ll tailor their value proposition to appeal to distributors they never before needed.
Technology, which has historically unleashed so much instability in the annuity industry, is the key to helping the industry reach its full potential. One need only to look at the election of Barack Obama to see the technological /communications model the annuity industry needs to duplicate: succinct expression of its value proposition delivered to a mass audience via technology. Life by video.
What worked for Obama can work for annuities.
©Copyright 2008 David A. Macchia. All rights reserved.