Filed Under:Annuities, Fixed Indexed

The annuity suitability process

Most advisors would agree that a fixed annuity can be an integral part of a sustainable income plan in retirement. Yet selling fixed annuities come with myriad regulations.

Increasingly, to handle those risks, general agencies, field marking organizations and broker-dealers have instituted suitability measures in the interest of consumer protection and overall due diligence.

According to data from LIMRA, 25 percent of the policies issued involve the replacement of an existing contract. In replacement situations, companies may look at the following factors, among other items:

  • Surrender charges
  • Death/income benefits (liquidity)
  • MVA (market-value adjustment)
  • Replacements in the past 36 months
  • Issue date of the contract being replaced

A carrier that decides to accept a replacement with one or more of these potential issues should review to ensure that there is a tangible net benefit from the transaction to the consumer.

Case outline and the cover letter

LHP: In life underwriting and sometimes long- term care, a cover letter is encouraged by underwriting departments and general agencies to “paint a picture” of the client during the preliminary application process. Can an agent do the same for annuities to help resolve or address suitability concerns and best represent the consumer/client?

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Nichole Morford

Nichole Morford
Managing Editor

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