investigation pending on the relationship between insurance companies and investment banks--surprised? Recently on a national continuing education conference call an insurance company corporate guy said--"Insurance companies are getting out of the guarantee business." I asked a follow up question just to make sure I heard him correctly--I did.
There are many articles in the financial press about annuity companies and the changes going on. (meaning insurance companies are taking care of themselves) There are also articles about how Private Equity Funds are looking at annuity companies as an investment. A ratings company recently affirmed the credit rating of a particular annuity company due to its marketing success--HENCE--the cause of this post.
My dad mailed me his annuity policies (the same company referred to above) he bought in 2007 through an agent in Texas. His agent was killed in an accident and he asked me to help him with some questions. YIKES!!!! My 80 year old dad bought policies with 18 year withdrawal penalties and so complex I don't think I can figure them out. To make it better he has 3 different companies but they are ALL owned by the same parent company.
An insurance agent who had applied to become the new agent went through a whole rendition on why he wouldn't do a policy like that one. That there were newer versions even better AND subject to a new policy with new commissions (8%)to him and new surrender charges.
The drawing just shows in simple terms that in order for the one policyholder to win then at best one will break even and one will lose. HOW CAN YOU GUARANTEE THAT YOU WILL BE ONE OF THE WINNERS? This is probably a little over simplified but I can guarantee you that the insurance company is taking care of itself, the agent is a professional sales person AND the regulators are not going to keep you from hurting yourself.
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