A group that sets standards for the insurance industry just gave insurers a sales loophole that leaves consumers fending for themselves.
Imagine visiting your family doctor because of chest pain. You wouldn’t expect him to treat you himself if he knew that a specialist — a cardiologist, for example — was better suited for the task. You would be particularly outraged if your doctor failed to refer you to the better-trained specialist because he wanted to line his own pockets.
On Feb. 13, in response to fears that rapidly growing categories of insurance-linked investments, such as annuities, are being marketed inappropriately to consumers, theto its model Suitability in Annuity Transactions regulation. The model is the association’s recommendation for what insurance laws should be in the states, which regulate the industry. It will most likely be adopted by a majority of them.
It’s yet another way that consumers are left to fend for themselves. For instance, the Trump administration abandoned the Department of Labor’s so-called fiduciary duty rule, which would have curtailed the sale of certain retirement products that weren’t in savers’ best interests and would have required financial advisors to disclose when they were getting paid to steer people into certain investments.
What if the saver had been advised to consider a much simpler strategy for downside protection with stock market participation: the purchase of a U.S. Treasury, or even a federally insured certificate of deposit, in an amount sufficient to return the original investment even in the face of a stock market collapse greater than any in U.S.
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