Monday, April 14, 2008

Did Dateline NBC Throw The Baby Out With The Bath Water?

When Dateline NBC aired its episode entitled “Tricks of the Trade,” which focused on some agents’ sales tactics when selling equity indexed annuities, did it throw the proverbial “baby out with the bath water” by not presenting a fair and balanced report about equity indexed annuities? Sure we can sit here and complain about the reporting being sensationalistic and one sided. But, is Dateline really the one to blame? Or, should we, members of the insurance industry, blame ourselves?

Just like many times before many of us will focus, after the fact, on how to do damage control from a story that misrepresents what the product is and the benefits it provides. Many compliance officers will probably be writing emails about the many more things we should not call ourselves and the words we can’t say. But is this really the solution to the problem? Is this really where our energy should be focused?

Unfortunately, it seems like the answer to those questions, at the moment, is yes. But why do we put ourselves in this position? An annuity (fixed, indexed, variable, etc.) can and should be part of a savings plan for many people. And, yes, this can include seniors.

We need to spend the time promoting the product for what it is and the benefits it offers. We should spend the time educating all of our constituents – consumers, agents, the media, state attorney generals, insurance commissioners – about what the product provides and how it is able to provide those benefits. There are some great suitability programs in place that we should talk about. Believe it or not, a suitability program can help solidify a sale for you, not cost you one. We should spend the time talking about how interest is credited and not worrying about if it can or if it does beat the market index the interest crediting is linked to. Why should we think that mentioning surrender charges is a bad thing or be embarrassed by them? They are an important part of the product and help provide the many benefits the product offers the client. Maybe we’re over simplifying here – but it really should be that simple.

If we take steps to get back to the basics of the product and its benefits, maybe we can start to turn some of the annuity critics into advocates. Wouldn’t it be great to be in a proactive position rather than a reactive one? What are your thoughts?


Jim Paris said...

Here is my take on the story:

Anonymous said...

I was hoping the report would have more objective and balance. Unfortunately, may of these bad "advisor's' will move onto some other product to tarnish.

Anonymous said...

The broadcast was entirely biased. Yes, they did catch some agents behaving badly. However, indexed annuities were merely the TOOL used in this bad behavior. Indexed annuities are not bad products! They are a safe money place that provides downside guarantees, and the opportunity for greater upside potential than other fixed instruments such as traditional fixed annuities.

How much of the information was slanted? Well, the producers highlighted presentations showing the longest surrender charge product in the industry- 16 years. The average surrender charge for indexed annuities sold is 10 years, as this represented 42.57% of sales for 4Q2007. In addition, most of the products with "big penalties" have premium bonuses. In fact, the 16-year product presented to Chris Hansen's Aunt Alice had a 10% up-front bonus. So, when Chris asked what would happen if she needed to access her cash in the first year, the answer shouldn't have been a flat "she'd pay a 20% penalty," It should have been "She would have a 20% penalty deducted from her $110,000 of Account Value and any indexed gains." Yet, no mention of bonuses in the segment...

It just looked like Lori Swanson had Dateline in her pocket. Did the viewers know that Lori Swanson has a political agenda? No- they just assume that she is a regulator looking out for the best interests of her consumers. Did people watching that night know that Chris Hansen didn't do his homework? No, because they rely on the news for BOTH sides of the story. If those watching that evening really knew that Minnesota's legislative auditor has launched a preliminary investigation into allegations of ethical and legal lapses in Attorney General Lori Swanson's office, do you think it would have made a difference? Do you think it would matter to them that Swanson and some of her top aides have been accused of trying to find defendants to fit lawsuits on high-profile topics? Perhaps I am not to only person who is intrigued by the fact that Lori Swanson has already sued five of the top ten indexed annuity carriers, and not a single fixed or variable annuity carrier. If she were truly concerned about the suitability of sales of annuities to seniors- why would she not look into this? I can tell you that I see just as many unsuitable sales of these products cross my desk, or in the headlines, as I do of indexed products. Lawsuit Lori is on a mission and Dateline is on the bandwagon.

James Morgan - Puritan Financial Advisor said...

Is this really where our energy should be focused?

James Morgan - Puritan Financial Advisor said...

Just like many times before many of us will focus, after the fact, on how to do damage control from a story that misrepresents what the product is and the benefits it provides.