The Basics

Introduction | Regulation | NTM 05-50 | IA Rates | Crediting Methods | History | Glossary

Regulation

Fixed and Indexed Annuities are fixed insurance products, and therefore regulated by state insurance laws. Agents who desire to sell Fixed and Indexed Annuities must obtain a life insurance license in the state where they are practicing. Insurance carriers, producers and consumers go through their local state insurance department when they have questions or concerns about Fixed or Indexed Annuities.

Variable Annuities are securities products, and thereby regulated by the Securities and Exchange Commission (SEC). Agents wanting to sell Variable Annuities must obtain a life insurance license in the state where they are practicing, as well as pass a securities exam(s). Insurance carriers, producers, and consumers go through the SEC when they have questions or concerns about Variable Annuities.

In the world of securities (including Variable Annuities), agents that are licensed to sell the products are regulated by the National Association of Securities Dealers (NASD). The NASD is a self-regulatory organization that oversees the financial regulatory practices of the securities industry. In a nutshell, if you hold securities license, you must abide by the rules of the NASD as well as the SEC.

Note that in the past, there have been a handful of Indexed Annuities that have been filed as securities products and registered with the SEC, despite the fact that they are fixed insurance products. An insurance carrier’s logic behind doing this may be for several reasons. One reason a carrier may register a fixed product as a security is to accommodate a distribution that is used to selling securities products (and the prospectuses that come with them). In the past, sales of registered Indexed Annuities have been nominal in comparison to total Indexed Annuity sales. Today, there are only three registered Indexed Annuity products available for sale.

Both Fixed and Variable product types have tight regulation, and rules that the insurance carriers and agents must abide by. The insurance carrier’s products, advertising materials, and training brochures are diligently reviewed in both the Fixed and Variable markets. Agents are required to be properly licensed to sell both types of products. The market conduct of the independent marketing organization, broker/dealer, and agent are all carefully monitored, whether she/he is selling the Fixed or Variable variety of annuity.