Menu

Iowa Issues Bulletin on Index Annuity Marketing Materials

Financial Services Regulatory   |   Insurance   |   Life Insurance & Annuity Litigation   |   Life Insurance & Financial Lines   |   September 17, 2014
Download   
Share Page

On September 15, Iowa Insurance Commissioner Nick Gerhart issued Bulletin 14-02 regarding Insurance Marketing Organizations (IMOs). Bulletin 14-02 sets forth Iowa Insurance Division (IID) concerns with the following index annuity marketing practices.

  • Marketing a withdrawal benefit's annual increase to the benefit base as an annual rate of return -- e.g., the client earns 8% -- without disclosing the restrictions imposed to obtain the benefit of the increase.
  • Marketing index crediting options as "uncapped" without disclosing how the limitations of the uncapped strategy, such as "spreads, participation rates, or the design of volatility controls, significantly reduce the actual returns" and lower future projected interest credits.
  • Using marketing materials that depict hypothetical crediting rates based upon back-casted index returns that use either periods when the stock market indices performed extremely well, or periods during which the index was unavailable.

In each situation, the IID is concerned that the marketing practice gives consumers unrealistic expectations about the index annuity or the interest to be credited on their annuity values.  While the IID recognized that IMO materials are generally intended for producer use only, it asserted that there is a possibility the materials could be viewed by consumers and that it is likely producers would reiterate the claims made in the materials provided to them.

The IID warned that using the above marketing methods without "effectively communicating the conditions, limitations and restrictions" constitutes using an unfair and deceptive practice. The IID reminded insurers that they "are responsible for any of these misleading practices by IMOs, related to the insurers' products."


©2018 Carlton Fields Jorden Burt, P.A. Carlton Fields practices law in California through Carlton Fields Jorden Burt, LLP. Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form via the link below. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.

Subscribe to Publications

Disclaimer

The information on this website is presented as a service for our clients and Internet users and is not intended to be legal advice, nor should you consider it as such. Although we welcome your inquiries, please keep in mind that merely contacting us will not establish an attorney-client relationship between us. Consequently, you should not convey any confidential information to us until a formal attorney-client relationship has been established. Please remember that electronic correspondence on the internet is not secure and that you should not include sensitive or confidential information in messages. With that in mind, we look forward to hearing from you.