Indexed Annuities - The History & Regulations That Impact Selling

With Steve is co-host, Sheryl Moore, indexed insurance product icon and creator of LifeSpecs, the number one industry due diligence software for financial professionals and carrier product design teams. The Very First Annuity 1100 -- 1700 B. C. Archeologists reveal that the legal codes of Egypt provide evidence that an annuity was purchased by a Prince ruling in Sint, in the Middle Empire. The First Fixed Annuity 1759- A Pennsylvania company offers the first annuity in America to Presbyterian ministers and their families. Fixed Annuities NOW: At the close of 2010, Fixed Annuity sales were $35.3 billion. The First Indexed Annuity: February 15, 1995—Keyport (now Sun Life) sold the Key Index Annuity for a premium of $21,000. Over a 5-year period the annuity grew to a value of $51,779. The average CD at the time would have returned $27,554 over the same five-year period, had the client continually renewed it. Indexed Annuities THEN vs. NOW Just three years after their introduction, sales of Indexed Annuities reached $4.1 billion at the close of 1998. Just a decade later, sales of the product had increased more than 500% to $26.7 billion at the close of 2008. By the close of 2010, Indexed Annuities had hit record sales of $32,345,563,979. Today, Indexed Annuities account for four out of every ten Fixed Annuities that are sold. Indexed annuities (IAs) were first introduced to the insurance market February 5, 1995. This variation of the fixed annuity has been regulated as a fixed insurance product since that time. The SEC first questioned the securities status of IAs in 1997. The National Association of Securities Dealers (NASD) suggested that the products be treated as securities in 2005. The SEC then declared that indexed annuities would be regulated as securities in 2008. On July 21, 2010, a long and hard-fought battle with securities regulators was finally won by the insurance industry. After being under question for 13 years, the securities status of indexed annuities was finally and indefinitely settled when President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act. The month of July was particularly victorious for the insurance industry, as the District of Columbia U.S. Court of Appeals vacated the Securities and Exchange Commission's (SEC) Rule 151A just nine days prior. Although the court's actions were considered a victory for the insurance industry, it did not assure that the SEC would not question the securities status of indexed annuities again sometime in the future. Fortunately, Senator Tom Harkin (D-IA) submitted a Congressional amendment to the Dodd-Frank Act to ensure that indexed annuities would continue to be regulated as fixed insurance products permanently. Therefore, the insurance industry has prevailed in a struggle that they have fought since 1997.