Archive Compliance Home Office Marketing Misc Regulatory Product Debuts Retirement Returns Sales
 
Compliance, Complaints & Regulators - Complaints
Regulatory - SEC, FINRA, NAIC and the States Complaints
    
Closed Consumer Complaints: Index Annuities
Historic By Carrier: 2006 - 2016 Complaint Factor Chart: Top Carriers: 2002-2016  
2016    2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004


Closed Index Annuity Complaints By Carrier

The National Association of Insurance Comm
issioners (NAIC) gathers data on customer complaints from all of the reporting state insurance departments. A blank means the carrier had not yet offered index annuities. This chart attempts to rank historic customer closed complaints from all carriers that have offered fixed index annuities from most to least, with greater weighting given to more recent years. Data Source: NAIC

  2016 2015 2014 2013 2012 2011 2010     2009  2008 2007  2006
Athene/Aviva/American Investors  29 8 6 4 3 10 30 34 46 33 48
Allianz Life Ins Company of North America  12 13 12 2 4 7 6 38 60 95 48
American Equity Investment  10 9 6 5 7 4 3 13 9 9 22
National Western 7 3 5 0 2 2 2 8 15 9 8
Conseco/Bankers Life & Casualty  6 6 8 9 4 10 8 10 15 14 11
Security Benefit 6 6 7 1 1 0          
North American Company 4 6 2 2 3 1 0 1 2 4 1
GAFRI/Great American 4 6 1 2 0 1 1 2 3 1 1
EquiTrust 4 3 0 1 2 0 1 8 6 7 3
Voya/ING Annuity & Life 3 2 2 2 3 1 2 3 4 7 3
F&G 3 9 6 5 5 1 5 12 9 10 7
Delaware/Sun Life Assurance 3 0 0 1 0 1 0 5 5 6 0
Midland National Life  2 10 1 1 4 2 5 6 14 14 14
Life Insurance Company of the Southwest 2 8 3 1 3 2 3 2 1 3 0
Jackson National Life 2 3 0 3 1 1 0 4 2 3 2
Securian/Minnesota Life 1 0 0 0 0 0 1 0 0    
AIG/Amer General/Western National 1 2 4 1 1 0 0 0 3 2 2
Aegon/Transamerica 1 2 2 0 0 0 0 1 0 2 1
Nationwide 1 2 1 0 0 0 1 0 1 1 0
Phoenix (PHL Life) 1 2 1 1 1 0          
Pacific Life 1 2 0 0 1 0          
Symetra 0 0 0 0 0 0 0 0 0    
Reliance Standard  1 0 0 0 0 0 0 0 0    
Union Central/Ameritas 1 0 0 0 0 0 0 0 0 0 0
Global Atlantic/Forethought 0 2 3 2 3 4 0 0 0 0 0
Lincoln Financial/Jefferson-Pilot 0 2 1 0 2 1 1 2 1 1 2
American National 0 1 3 0 0 0 0 0 1 0 1
Sentinel Security 0 0 1
Americo 0 0 0 2 3 0 0 0 4 0 31
Principal   0 0 0 1 0 0 0 1 1 0 0
Oxford Life   0 0 0 0 1 0 0 1 1 0 0
Allstate/Lincoln Benefit  0 2 1 0 0 0 0 0 1 6 4
Investors Insurance Corp  0 0 0 0 0 0 1 0 0 0 2
Physicians 0 0 0 0 0 0 0 0 1 2 0
Foresters  0 0 0 0 0 1 0 0 0    
Sagicor Life  0 1 0 0 0 0 0 0 1    
Standard Life of Oregon 0 0 0 0 0 0 0 0 1 0 0
Lafayette Life  0 0 0 0 0 1 0 0 0 0 0
RBC/Liberty 0 0 0 0 0 0 0 0 0 1 0
Reliance Standard  0 0 0 0 0 0 0 0 0    
Dearborn 0 0 0 0 0 0 0 0 0 0 0
CUNA Mutual Life/CMFG 0 0 0 0 0 0 0 0 0 0 0
Totals 106 119 77 46 54 50 80 151 206 230 211
  2016 2015 2014 2013 2012 2011 2010    2009  2008 2007  2006

Complaint Factor Chart
This chart compares the complaint ratio per dollars of annuity sales of the top nine index annuity sellers over time with the industry average NAIC index annuity coded complaints, represented by 1.0, since 2002. To wit, if a carrier’s complaint factor is 3.0 it means the carrier had three times the industry average complaints per dollar of sales, if the factor is 0.5 the carrier had half the industry average complaints; zero means no complaints for the carrier. Great American and Lincoln Financial tied for having the lowest level of complaints for the last twelve years with the average insurer generating five times more index annuity complaints than these two carriers.

  


2016 FIA Complaints Lower 

I reviewed and totaled the number of closed customer complaints for 2016 relating to all index annuities that are currently offering annuities or have   offered annuities within the last 10 years. Total complaints decreased from 119 in 2015 to 106 in 2016. On a sales adjusted basis complaints are 22% lower than for the previous year.

No Complaint Carriers
The active carrier with an FIA sales history of twelve years or more that has never received a complaint is CMFG Life/CUNA Mutual
.

Suitability & Misrepresentation Complaints
It is difficult to single out complaints for misrepresentation or unsuitable selling because this data is not broken out by product type, but only by carrier. Misrepresentation complaints were 124 – down from 2015, and suitability complaints were lower. These complaints are not index annuity specific.   Caveats The number of NAIC total FIA complaints shown in their annual complaint summaries has always been a higher total than the total number of complaints I compile because I only record complaints of carriers that currently sell or have sold fixed index annuities in the past. By contrast, the NAIC totals include complaints miscoded as FIA complaints from carriers that never sold FIAs.  

Normally the difference between our tallies is close, but not this year. Looking at the individual NAIC complaint records of 67 carriers that are selling or did sell FIAs I get a total of 106; the NAIC reports 142. Frankly, I'm not sure where the NAIC is getting that number from. I did find a few miscoded FIA complaints under some variable annuity carriers, but there were still over thirty unaccounted for. To be blunt, the NAIC FIA complaint total is far from accurate.

However, my numbers are not 100% accurate either. It appears there were 12 annuity complaints that were miscoded as variable annuity complaints (because the FIA carriers with these complaints do not offer variable annuities), but a dozen other index annuity carriers also offer variable annuities and it is probable some of their FIA complaints should have been coded VA. The data base relies on voluntary reporting from the state insurance departments and may not be thorough. In addition, this does not include index annuity complaints filed with securities regulators.

 




2015 FIA Complaints Spiked
Total complaints jumped from 77 in 2014 to 119 in 2015. On a sales adjusted basis complaints are 28% higher than for the previous year.  Why are complaints spiking? In past years there has been a pattern of some carriers having consistently higher complaints than others – relative to premium received – but this year some carriers that had histories of zero or near zero complaints were hit with multiple complaints. Nine of the closed complaints came from carriers that haven't marketed FIAs for two or more years. Over the last three years the new factors in the FIA world are lower caps, less rewarding lifetime withdrawal riders and volatility controlled indices. However, there doesn't appear to be a strong correlation between increased complaints and lower GLWB roll-up rates or increased complaints and vol-controlled indexes.  

Complaints are still low. Over the last dozen years the rate of closed customer complaints (adjusting for sales) has ranged from one complaint for each $842 million of premium down to one for each $109 million. The overall long-term average is 1 per $427 million of premium and last year was 1 for $450 million. It is possible that the complaints are merely averaging out.  

It also helps to keep a bit of perspective. Overall, there were 147,005 closed customer complaints dealt with last year by state insurance regulators; 8,780 concerned life insurance and all     annuities. FINRA reported 3,250 complaints involving securities and the SEC top ten complaint list alone totaled 4,686 complaints. On this scale, the 119 FIA complaints barely register.   It is also worth noting that of the over 500,000 people that purchased a fixed index annuity in 2015 and the several million that already owned FIAs, that only 119 sales resulted in a closed customer complaint. Anyway you slice the numbers you still have well over 99% of FIA owners that did not feel the need to file a complaint.   None of this minimizes the reality that complaints have gone up. If a few bad agents are causing the problem, the states are working to get rid of them – in several cases agents were referred for disciplinary action. Hopefully, the complaint trend will begin edging down in 2016.

No Complaint Carriers
The active carriers with an FIA sales history of eleven years or more that have never received a complaint are CMFG Life/CUNA Mutual and Ameritas.  

Suitability & Misrepresentation Complaints
It is difficult to single out complaints for misrepresentation or unsuitable selling because this data is not broken out by product type, but only by carrier. Misrepresentation complaints were 151 – up from 2014, and suitability complaints were lower when examined on a sales-adjusted basis. These complaints are not index annuity specific.
   

2014 FIA Complaints Low
I reviewed and totaled the number of closed customer complaints for 2014 relating to all index annuities that are currently offering annuities or have offered annuities within the last 8 years. Total complaints jumped from 46 in 2013 to 77 in 2014. On a sales adjusted basis complaints are 26% higher than for the previous year.   I can’t explain the increase. I looked at the possible effect of managed volatility indices – since it is a new variable in the mix –  but returns from these new methods were only beginning to be reported at the end of 2014, thus consumers would not have known whether or not they had something to complain about. It is possible that the increase is simply a fluke. In any event, even 77 complaints means FIAs still have the lowest complaints of any insurance product.   

Suitability & Misrepresentation Complaints
It is difficult to single out complaints for misrepresentation or unsuitable selling because this data is not broken out by product type, but only by carrier. Misrepresentation and suitability complaints were 118 and 101 respectively, up a bit from 2013, but essentially flat when examined on a sales-adjusted basis. These complaints are not index annuity specific.  

2014 Sales Per Complaint Top 10 FIA Sellers (a higher average premium means fewer complaints)    

EquiTrust    $   no complaints

 Caveats
I find there were 77 specifically coded index annuity complaints. NAIC reports 89 in their “Complaints By Coverage Type”. The reason for the difference is I tally the actual complaints per carrier for only carriers that sell or have sold index annuities. The NAIC totals include miscoded index annuity complaints against carriers that do not offer index annuities (such as recording FIA complaints in 2014 against AXA and New York Life) .   However, my numbers are not 100% accurate either. It appears there were 2 annuity complaints that were miscoded as variable annuity complaints (because the FIA carriers with these complaints do not offer variable annuities), but a dozen other index annuity carriers also offer variable annuities and it is probable some of their index annuity complaints should have been coded VA. These closed customer complaints cover the gamut from fraud to delays in policyholder services, and although the complaints are closed I am unable to determine how many were resolved in the carrier or agents’ favor. The data base relies on voluntary reporting from the state insurance departments and may not be thorough. In addition, this does not include index annuity complaints filed with securities regulator.

Great American 3,101,623,000 
Midland National Life 1,806,839,000
Symetra 1,533,485,000
Allianz 1,061,228,000
Voya 769,136,000
American Equity 666,573,000
Industry Average  622,836,727
Security Benefit  594,755,000
Athene/Aviva 401,740,000
F&G Life 299,813,000

2013 FIA Complaints Low
The low number of 2013 FIA complaints is nothing short of amazing. FIAs have a lower complaint record than any other type of insurance and annuity agents have far fewer complaints than securities representatives. On a sales adjusted basis complaints are one eighth of where they were seven years ago. The active carriers with a FIA sales history of ten years or more that have never received a complaint are CMFG Life/CUNA Mutual and Ameritas/Union Central. There were a total of 228 complaints against these carriers coded as general annuity complaints – down over a quarter from last year.

Suitability & Misrepresentation Complaints
It is difficult to single out complaints for misrepresentation or unsuitable selling because this data is not broken out by product type, but only by carrier. Misrepresentation and suitability complaints were 108 and 77 respectively, down over 85% from the high point in 2008. These complaints are not index annuity specific. It should be noted that one carrier representing only 1% of FIA sales was responsible for 20% of FIA complaints, 25% of suitability complaints and 21% of misrepresentation complaints.

2013 Sales Per Complaint Top 10 FIA Sellers (a higher average premium means fewer complaints)    

Symetra   $   no complaints

 Caveats
I find there were 46 specifically coded index annuity complaints. NAIC reports 57 in their “Complaints By Coverage Type”. The reason for the difference is I tally the actual complaints per carrier for only carriers that sell or have sold index annuities. The NAIC totals include miscoded index annuity complaints against carriers that do not offer index annuities However, my numbers are not 100% accurate either. It appears there were 6 annuity complaints that were miscoded as variable annuity complaints (because the index annuity carriers with these complaints do not offer variable annuities) and if some or all of these were included the average sale per complaint would drop, but a dozen other index annuity carriers also offer variable annuities and it is probable some of their index annuity complaints should have been coded VA. These closed customer complaints cover the gamut from fraud to delays in policyholder services, and although the complaints are closed I am unable to determine how many were resolved in the carrier or agents’ favor. The data base relies on voluntary reporting from the state insurance departments and may not be thorough. In addition, this does not include index annuity complaints filed with securities regulators.

Security Benefit  4,525,795,600 
Allianz  3,006,239,000
EquiTrust    1,957,604,100
Midland National Life 1,780,075,000
Great American 1,529,481,250 
Industry Average  841,525,196
American Equity   776,484,860
ING 610,659,450
Aviva 508,738,750 
Jackson National Life 463,246,933 

2012 FIA Complaints Low
In 2012 there were 54 index annuity complaints...or the equivalent of 1 complaint for every $633 million in sales...or roughly 1 complaint for every 9300 sales ...or out of the roughly 3.4 million people that own an FIA (a very rough estimate) 99.998% did not file a complaint...or even though 2012 fixed rate annuity sales were two-thirds of FIA sales they generated almost two-times the complaints.

Led by Great American, eleven of the top 30 index carriers had no index annuity coded complaints last year. Other top carriers with zero complaints were Lincoln Benefit, Symetra, Genworth, Lafayette Life, Athene, CUNA, Reliance Standard and Standard Life (OR) The worst complaint record for a top 20 carrier was one complaint for each $127 million of sales.

The numbers clearly show that the FIA industry can take off the hair shirt that some Henny Penny regulators and yellow journalists have tried to cloak it in. Index annuity agents generate very, very, very few complaints because their customers are happy. And shame on anyone that says differently because the results loudly and clearly speak for themselves. 

Total Annuity Complaints
There were a total of 312 complaints against these carriers coded as general annuity complaints. Although often many of these carriers also offer stated rate and variable annuities I believe a percentage of these generic annuity complaints are miscoded index annuity complaints based on the relative sales of the different annuity lines.

Suitability & Misrepresentation Complaints
It is difficult to single out complaints for misrepresentation or unsuitable selling because this data is not broken out by product type, but only bycarrier. Misrepresentation and suitability complaints were 118 and 75 respectively, down over 80% from the high point in 2008. These complaints are not index annuity specific. It should be noted that one carrier representing only 1.6% of FIA sales was responsible for 28% of suitability and 15% of misrepresentation complaints.

2012 Sales Per Complaint Top 10 FIA Sellers (a higher average premium means fewer complaints)

Great American     $   no complaints  Caveats
I find there were 54 specifically coded index
annuity complaints. NAIC reports 58 in their “Complaints By Coverage Type”. The reason for the difference is I tally the actual complaints per carrier for only carriers that sell or have sold index annuities. The NAIC totals include miscoded index annuity complaints against carriers that do not offer index annuities.

However, my numbers are not 100% accurate either. It appears there were 6 annuity complaints that were miscoded as variable annuity complaints (because the index annuity carriers with these complaints do not offer variable annuities), and if some or all of these were included the average sale per complaint would drop, but a dozen other index annuity carriers also offer variable annuities and it is probable some of their index annuity complaints should have been coded VA. These closed customer complaints cover the gamut from fraud to delays in policyholder services, and although the complaints are closed I am unable to determine how many were resolved in the carrier or agents’ favor. The data base relies on voluntary reporting from the state insurance departments and may not be thorough. In addition, this does not include index annuity  

Security Benefit  2,940,500,30 
Jackson National Life  1,696,711,600
Allianz  1,350,731,175 
Aviva 1,332,707,667  
Lincoln Financial Group  757,506,400  
Industry Average  633,333,333 
EquiTrust  586,904,700 
American Equity 490,603,671 
Midland National Life  403,002,500 
ING  387,567,933 


2011 Index Annuity Complaints Plummet (4/11)
By 2007 the index annuity carriers averaged one customer complaint for every $109 million of premium sold. However, over the last four years index annuity complaints dropped dramatically. In 2011 there was one index annuity complaint  for every $660 million of premium. Total index annuity closed customer complaints against carriers offering index annuities in 2011 were 50 contrasted with 80 the previous year. 

2011 complaints were the lowest in 7 years and 6 TIMES LOWER than they were in 2007 

Led by Phoenix (PHL) Life and Security Benefit, twenty of the top 30 index carriers had no index annuity coded complaints last year. Other top carriers with zero complaints were EquiTrust, American National, American General, Americo, Lincoln Benefit, CUNA, Reliance Standard, Western National, Liberty, UNIFI and Sagicor. Looking back at the 54 carriers that have written index annuities over the past 7 years – including both currently active and inactive sellers 37  of all index annuity carriers received zero complaints. The worst complaint record for a top 20 annuity carrier was one complaint for each $73 million of sales.

Total Annuity Complaints
There were a total of 281 complaints against these carriers coded as general annuity complaints. Although often many of these carriers also offer stated rate and variable annuities I believe a percentage of these generic annuity complaints are miscoded index annuity complaints based on the relative sales of the different annuity lines. Even so, total 2011 complaints against index annuity carriers decreased 81% when compared with 2008.

Suitability & Misrepresentation Complaints
It is difficult to single out complaints for misrepresentation or unsuitable selling because this data is not broken out by product type, but only by carrier. Misrepresentation and suitability complaints were 121 and 65 respectively, significantly better than the previous year and down over 80% from the high point in 2008. These complaints are not index annuity specific. 

2011 Sales Per Complaint Top 10 FIA Sellers (a higher average premium means fewer complaints)

Great American     $   1,860,125,300  Caveats
I find there were 50 specifically coded index annuity complaints. NAIC reports 53 in their “Complaints By Coverage Type”. The reason for the difference is I tally the actual complaints per carrier for only carriers that sell or have sold index annuities. The NAIC totals include miscoded index annuity complaints against carriers that do not offer index annuities.

However, my numbers are not 100% accurate either. It appears there were 10 annuity complaints that were miscoded as variable annuity complaints (because the index annuity carriers with these complaints do not offer variable annuities), and if some or all of these were included the average sale per complaint would drop, but a dozen other index annuity carriers also offer variable annuities and it is probable some of their index annuity complaints should have been coded VA. These closed customer complaints cover the gamut from fraud to delays in policyholder services, and although the complaints are closed I am unable to determine how many were resolved in the carrier or agents’ favor. The data base relies on voluntary reporting from the state insurance departments and may not be thorough. In addition, this does not include index annuity complaints filed with securities regulators.

* Depending upon the source there were 3 carriers ranked as the 10th largest FIA seller for 2011, because of this I chose to end the field with the top nine.

North American  1,671,606,000
Lincoln Financial Group 1,614,907,200
Jackson National Life  1,457,198,200
ING 1,428,448,400
American Equity 1,054,320,525
Allianz 902,765,329
Midland National Life  774,330,500
Industry Average  659,560,000
Aviva  431,278,890 
   


2010: 115 Securities Complaint For Each Index Annuity Complaint (12/11)  

 

In the spring of 2011 I examined and contrasted securities and fixed annuity complaints for 2010. At the time I had a complete list and breakdown by category of FINRA and NAIC complaints, a breakdown of the top ten SEC complaints and no data from state securities departments or NASAA. NASAA has finally released their 2010 report eight months after everyone else. Representing 45 states NASAA reports there were 7063 investigations of complaints in 2010. 

How many of these are due to allegations of improper index annuity selling or “source of funds” concerns? NASAA doesn’t exactly say. All they will say is that there were “dozens of cases reported involving variable or equity indexed annuities.” I have asked NASAA for a breakdown, but it has not been forthcoming. The NAIC reported 80 index annuity complaints. Even given the greatest latitude, the number of NASAA complaints relating to index annuities could not exceed 60. Therefore, in 2010 there were, at least, 16,130 securities related complaints and, at most, 140 index annuity complaints.


Securities Complaints (5/11)
If I want to know the complaints against a carrier, broken down by state or total complaints for the entire country, I can go to the link for the Consumer Information Source on the main page of the NAIC website (naic.org). Their site will even tell me the category of the complaint, and how the carrier’s complaint ratio compares with other carriers. And I can find this information for not only the current year, but going back three years. Let’s see how easy it is to get complaint data from the securities regulators.

FINRA reports that there were 3,208 customer complaints in 2010. Their complaints were down 30% from 2007 (http://www.finra.org/Newsroom/Statistics/). All in all, FINRA complaints have significantly decreased from 5,000 level reported in 2008 and 2009.

SEC I was unable to find the exact number of customer complaints for 2010 for the SEC (they changed the way they track complaints last year), and all they list are the top 10 categories. Even being very creative with terms in the advanced search area of their web site I was unable to find any files, forms or pages that gave me any additional information on complaints, past or present. I can say the top 10 categories alone resulted in 5,919 complaints and that included 444 complaints involving misrepresentation by “Broker-Dealers, Investment Advisers, and Associated Persons.” There were also 328 complaints regarding excessive or unnecessary fees (http://www.sec.gov/news/data.htm).  

NASAA The North American Securities Administration Association makes a lot of noise about enforcement, but they don’t seem to keep current with whom they’re enforcing. The last report their web site covers is the period from 2008-2009 where they report 2294 Enforcement Actions Initiated by securities departments in these 42 States of America. The misleading statistic they keep bandying about, “34 Percent of all Cases of Senior Investment Exploitation Involve Variable or Equity-Index Annuities”, is from 2004 and has never been updated (of course, every statistician knows you can’t combine unrelated categories or you get worthless data – saying 99% of adults are either axe murders or drank milk as children shows the problem with NASAA’s statement).    

114 securities complaints for every 1 index annuity complaint  

I could, of course, go through and tally up the individual states, but there’s problem with that. State securities department tend not to report complaints, but only actions, which aren’t the same thing. Indeed, when I was researching regulatory actions I was assured by two securities commissioners that they had received “hundreds of complaints” against index annuity producers. When I mentioned to each that I had uncovered less than a handful of regulatory actions against annuity agents in their state and would like to come to their offices and review these “hundreds of complaints” I was told that they didn’t keep records of those files.  

When I researched state regulatory actions from both insurance and securities departments last summer there were well over 5000 actions over this 20 month period, but only 63 involved index annuities. Again, these were not complaints, but even still, the non-annuity actions taken outnumbered the annuity actions by roughly 90 to 1.  

Ignoring NASAA and the state securities departments there were 9,127 complaints against securities registered firms and individuals in 2010 and 80 against index annuity carriers. Or, in other words, for every 1 complaint in the annuity world there were 114 (at least) in the securities world. It would seem that all of this attention suggesting that the index annuity industry is somehow ethically inferior to the securities industry is misdirected.  

 

Complaints Per Agent
To be sure, there are many more securities people so they should have more complaints on a per person basis, but let’s dig a little deeper. FINRA says there were 630,692 registered representatives last year. The SEC says there were approximately 301,000 SEC and state registered investment advisors, but only 12% of the advisors are not registered reps (Study on Investment Advisers and Broker-Dealers, January 2011, SEC). This means there were 36,120 advisors-only and 630,692 reps for a total of 666,812 securities people.  

I do not know how many agents sell index annuities. I do know some of the larger index annuity firms have over 35,000 agents, and there are over 30 index annuity carriers, but many agents are contracted with more than one carrier, making it difficult to get an exact count of all the agents selling index annuities. So I’ll approach this from the other side.  

There are 666,812 securities registered sales people. They have 114 times the complaints of the index annuity people. If there were only 5,850 agents selling index annuities they would still have a lower complaint ratio than the securities industry. I realize that over half of the agents are securities registered, but, based on my research, they represented fewer than ten SEC/FINRA actions in 2010. Even excluding state securities departments there were still 8 to 10 times more complaints for every 1000 registered/licensed person in the securities world than in the annuities world.  

It’s Time For Critics To Shut Up  
I am tired of hearing slams by people with an agenda implying that the index annuity industry has more complaints and more problems than the securities industry. The facts are very clear. The index annuity industry has a
better complaint
record than the securities industry, and thanks to increased efforts in suitable selling it continues to improve. Frankly, if you’re not willing to admit that, you should simply keep your mouth shut.


2010 Index Annuity Complaints Plummet (4/11)
By 2007 the index annuity carriers averaged one customer complaint for every $109 million of premium sold. However, over the next three years index annuity complaints dropped by roughly 75% with one complaint for every $404 million of premium reported in 2010. 

The carrier with the most improved complaint record was Allianz where complaints were down 84% from 2009.Total index annuity complaints against carriers offering index annuities in 2010 were 80 contrasted with 152 the previous year. 2010 complaints were the lowest in 6 years. Led by Jackson National Life, thirteen of the top 25 index carriers had no index annuity coded complaints last year. The other top 25 carriers with zero complaints were North American Company, Lincoln Benefit, RBC, Forethought, American National, Lafayette Life, American General, Americo, CUNA, Reliance Standard and UNIFI. Two-thirds of all index annuity carriers received zero complaints. The worst complaint record for a top 25 annuity carrier was one complaint for each $74 million of sales.

Total Annuity Complaints
There were a total of 401 complaints against these carriers coded as general annuity complaints. Although often many of these carriers also offer stated rate and variable annuities I believe a significant percentage of these generic annuity complaints are miscoded index annuity complaints based on the relative sales of the different annuity lines. Even so, total 2010 complaints against index annuity carriers decreased 65% when compared with 2009.

Suitability & Misrepresentation Complaints
It is difficult to single out complaints for misrepresentation or unsuitable selling because this data is not broken out by product type, but only by carrier. Misrepresentation and suitability complaints were 344 and 112 respectively, significantly better than the previous year. These complaints are not index annuity specific. There were 30 complaints regarding misleading ads with Aviva accounting for half of this total.

 2010 Sales Per Complaint Top 10 FIA Sellers (a higher average premium means fewer complaints)

Jackson National Life     $   no complaints  Caveats
I find there were 80 specifically coded indexannuity complaints. NAIC reports 85 in their “Complaints By Coverage Type”. The reason for the difference is I tally the actual complaints per carrier for only carriers that sell index annuities. The NAIC totals include miscoded index annuity complaints against carriers that do not offer index annuities such as New York Life.

However, my numbers are not 100% accurate either. It appears there were 12 annuity complaints that were miscoded as variable annuity complaints (because the index annuity carriers with these complaints do not offer variable annuities), and if these were included the average sale per complaint would drop, but a dozen other index annuity carriers also offer variable annuities and it is probable some of their index annuity complaints should have been coded VA.  

North American Company no complaints
Lincoln Financial Group  2,026,878,555
Allianz  1,142,832,506
ING 888,480,782
Great American   858,771,429
Industry Average  409,437,525
National Life (LSW)  340,690,761
American Equity 316,071,985
Midland National Life  315,334,982
Aviva  174,353,052

Why The Money Article Is Wrong About Annuity Complaints (5/11)
When Lisa Gibbs, the author of “The Safety Trap” article called me last May her very first comment was “your complaint numbers are wrong because the NAIC complaint numbers are wrong and actual complaints are much higher”. And it was that tone that resulted in the stridently biased anti-annuity Money magazine article that appeared in January 2011.

The NAIC closed complaint numbers are not an inclusive list of complaints. Participation by states is voluntary and one states coding of which category a complaint falls into may differ from another. I couldn’t agree more that, for example, the 80 closed index annuity complaints I report are not the exact number of index annuity complaints for 2010. As I’ve mentioned, some index annuity carriers that do not offer variable annuities had variable annuity complaints – these may well have been index annuity complaints miscoded. In addition, there are complaints simply coded “annuity” that may well have been index annuity complaints. By the same token, this year and past year totals included index annuity complaints from variable annuity carriers that do not offer index annuities. I also agree that not all states contribute all data, but this does little to diminish the data’s true value.

The real story is index annuity complaints have fallen dramatically since carriers and insurance regulators have ramped up suitability efforts  

All of the data year after year is from the same NAIC data pool. This should mean any biases or data quirks will continue to be the same, thus the results should convey the same correlations. I tallied 80 complaints for 2010 and 152 complaints for 2009. Even if the actual complaints were, respectively, 160 and 300 the real story is that index annuity complaints fell in half. The reality is on a sale-by-sale basis the number of index annuity complaints has fallen by 75% since 2007, and even if we had available the correctly coded data it would still show a tremendous drop in the number of complaints.

Lisa Gibbs wrote “According to data that 16 states provided to MONEY, index annuities accounted for 30% of annuity-related complaints to regulators in 2009.” There are bias problems that make this statement misleading. A reality of math is changes in little numbers mean big percentage changes even though the number is still small – if the murders in a city of 10 million people increased from 2 to 3 in a year that would be a 50% increase, but the overall murder rate would be insignificant. Gibbs is using percentages, rather than actual numbers, to make things appear larger than they are.

Using the NAIC numbers, if we look at complaints only coded as fixed annuity and index annuity, index annuities make up 47% of those complaints. However, if we look at all annuity complaints index annuities are only 14% of that total. If we look at all 2010 life and annuity complaints index annuities represented 1% of the total. And if we look at all of the 78,101 complaints reported against all insurance carriers and agents, index annuities are 0.1%.

As an example of the article’s bias Gibbs says index annuity complaints are 55% of Florida annuity complaints. I went through the files of the 1791 actions taken against insurance and securities registered people in Florida. Only 26 involved annuities at all. Although it appears 15 of these complaints did involve index annuities, we’re talking about 15 complaints out of 1791, or less than 1%. But instead, Gibbs reports it as 55% of 26 simply to make a non-event look sensational. Here’s the reality. There are far fewer index annuity complaints than there were a few years ago. Of the roughly 469,000 consumers that purchased an annuity last year only 80 complained. This is a complaint ratio of 0.0002%. I bet Money has more customers than this complaining about inaccuracies in their reporting.


2009 Index Annuity Complaints Sharply Lower (4/10)   
In 2004 index annuity carriers averaged a very respectable one customer complaint for every $614 million of premium sold, but by 2007 the index annuity carriers averaged one customer complaint for every $109 million of premium sold
– six times worse. However, over the last two years index annuity complaints have dropped by roughly half with one complaint for every $198 million of premium in 2009. Total equity index annuity complaints against carriers offering index annuities in 2009 were 152 contrasted with 212 the previous year.
Led by RBC, ten of the top 25 index carriers had no index annuity coded complaints last year. The other top 25 carriers with zero complaints were Forethought, Lincoln Benefit, Investors Insurance, American National, Lafayette Life, American General/Western National, CUNA, Americo, and Nationwide. Over half of all index annuity carriers received zero complaints. The worst complaint record for a top 25 annuity carrier was one complaint for each $33 million of sales. 

Total Annuity Complaints
There were a total of 1,131 complaints against these carriers coded as general annuity complaints. Altho often many of these carriers also offer stated rate and variable annuities I believe a significant percentage of these generic annuity complaints are miscoded index annuity complaints based on the relative sales of the different annuity lines. Even so, total 2010 complaints against index annuity carriers decreased 25%  when compared with 2008.

Suitability & Misrepresentation Complaints
It is difficult to single out complaints for misrepresentation or unsuitable selling because this data is not broken out by product type, but only by carrier. Misrepresentation and suitability complaints were 504 and 169 respectively, significantly better than the previous year. These complaints are not index annuity specific.

2009 Sales Per Complaint Top 10 FIA Sellers (a higher average premium means fewer complaints)

RBC    $   no complaints  Caveats
I find there were 152 specifically coded index annuity complaints; 150 if you only count carriers with 2009 sales. NAIC reports 155 in their “Complaints By Coverage Type”. The reason for the difference is I tally the actual complaints per carrier for only carriers that sell index annuities. The NAIC totals include miscoded index annuity complaints against carriers that do not offer index annuities such as Axa, John Hancock and New York Life.

However, my numbers are probably not 100% accurate either. It appears there were 23 annuity complaints that were miscoded as variable annuity complaints (because the index annuity carriers with these complaints do not offer variable annuities), and if these were included the average sale per complaint would drop, but a dozen other index annuity carriers also offer variable annuities and it is probable some of their index annuity complaints should have been coded VA.

Lincoln Financial Group     $   1,090,820,166
North American Company 1,037,100,000
ING  624,593,465
National Life (LSW)   591,294,746
Jackson National Life 561,057,815
American Equity   271,330,904
Midland National Life  221,766,667
Industry Average  198,121,691
Aviva/American Investors 162,794,189
Allianz  146,016,604

2008 Index Annuity Complaints Lower  (4/09)
In 2004 index annuity carriers averaged one customer complaint for every $614 million of premium sold, in 2005 the rate was one complaint for every $310 million and in 2007 the index annuity carriers averaged one customer complaint for every $109 million of premium sold. For 2008 there was one complaint for every $126 million of premium and the top 25 carriers averaged a slightly better rate of one complaint per $131 million. There were fewer index annuity complaints in 2008 than in 2007 or 2006.
Led by Forethought, five of the top 25 index carriers had no index annuity coded complaints last year. The other top 25 carriers with zero complaints were Investors Insurance, Lafayette Life, Fort Dearborn and CUNA Mutual. Two of the top ten sellers Lincoln National Life and LSW had only one complaint. The worst complaint record for a top 25 annuity carrier was one complaint for each $17 million of sales. 

2008 Sales Per Complaint Top 10 FIA Sellers (a higher average premium means fewer complaints)

Lincoln Financial Group     $   1,079,368,300  Caveats
There were 212 specifically coded index annuity complaints. It appears there were 27 annuity complaints that were miscoded as variable annuity complaints (because the index annuity carriers with these complaints do not offer variable annuities), and if these were included the average sale per complaint would drop to $112 million, but a dozen other index annuity carriers also offer variable annuities and it is possible some of their index annuity complaints should have been coded VA.

 

National Life (LSW)    $   914,559,312
North American Company 633,050,000
Jackson National Life 464,031,984
ING  359,176,955
American Equity   249,010,920
Aviva/American Investors 154,105,033
OM Financial  135,825,580
Industry Average  126,189,991
Midland National Life  114,900,000
Allianz  70,482,944

2007 Index Annuity Complaints Steady (4/08)  
In 2004 the index annuity carriers averaged one customer complaint for every $614 million of premium sold, in 2005 the rate was one complaint for every $310 million and in 2006 the index annuity carriers averaged one customer complaint for every $119 million of premium sold. In 2007 there was one complaint for every $109 million of premium. What this means is there were roughly six times as many specific complaints against index annuities in 2007 as there were in 2004.

There is a “but” in all of this. Even tho the rate of complaints increased slightly from 2006 to 2007 for all index annuity carriers if you exclude Allianz the complaints decreased. Without Allianz the rest of the industry had a complaint rate of one for every $145 million in 2007, down from $118 million the previous year. While all index carriers averaged one complaint per $109 million of premium sold the top 25 carriers averaged one complaint per $111 million. The worst ratio for any individual top 25 index annuity carrier was one complaint for each $50 million of sales. 

2007 Sales Per Complaint Top 10 FIA Sellers (a higher average premium means fewer complaints)

Great American     $   1,007,147,390  Caveats
The NAIC database does not include complaints filed with state security offices, NASD or SEC; however, it has been difficult for me to find hard data from these other sources that would radically change the implications of the data collected. I saw a slowing in the increase of overall complaints over the previous year, which is good news, but it is not as good as a decline in complaints. Based on anecdotal evidence I believe part of the reason for the increase is that annuity customers are being encouraged to complain by securities salespeople, but the fact remains that there appears to be more unhappy index annuity owners than there were a few years ago.

 

Jackson National Life   297,833,525
American Equity 232,619,528
OM Financial  196,002,736
ING  187,514,847
Aviva/American Investors 131,707,817
EquiTrust 125,495,866
Midland National Life  118,278,571
Industry Average  109,056,690
Allianz  57,091,190
Conseco/Bankers Life  55,994,752

2006 Index Annuity Complaints Skyrocket (4/07)   
Last year, in response to security regulator allegations of bad index annuity selling practices, I used a slide titled “Smoke vs. Fire” showing that consumer complaints concerning index annuities were relatively few and that these allegations were mostly smoke and little fire. After reviewing consumer complaints for 2006 I can unfortunately state that there is fire now. In 2006 the index annuity carriers averaged one customer complaint for every $119 million of premium sold, this compares with a rate of one complaint for every $310 million in 2005 and one complaint for every $614 million in 2004. Because the average premium has remained pretty much the same over the last three years what this means is there were five times as many complaints in 2006 as there were in 2004. By contrast, variable annuity complaints have steadily declined.
In 2004 variable and index annuity complaints were on a par, but by 2006 for every one variable annuity complaint there were eight index annuity complaints based on premium sold.  

2006 Sales Per Complaint Top 10 FIA Sellers (a higher average premium means fewer complaints)

Sun Life  $   no complaints  Caveats
Sun Life was the top seller of index annuities with zero complaints and others in the top 25 with zero complaints were LSW, CUNA Mutual, Protective/West Coast Life, Standard Life of Oregon, RBC, Lafayette Life and Union Central. There are seven carriers that have never received a complaint in the five years I have been compiling statistics.

While all index carriers averaged one complaint per $121 million of premium sold the top 25 carriers averaged one complaint per $119 million. In 2005 there were 87 complaints for the top 25 carriers and in 2004 there were 35 complaints. The worst ratio for one of the top 25 index annuity carriers was one complaint for each $4.5 million of sales; I found no complaints for eight carriers.  

ING   767,748,603
Jackson National Life  473,948,597
Jefferson-Pilot  435,904,595
EquiTrust 333,796,904
Old Mutual/F&G 297,089,682
Midland National Life 143,078,571
Allianz  139,195,947
Industry Average  118,964,136
American Equity 81,239,009
Aviva 52,863,647


2005 Index Annuity Complaints Up Sharply (5/06)
Although VA complaints are higher the sales are much higher than for index annuities. Variable annuity 2005 premium was $128 billion 1 for the top 25 carriers. Index annuity top 25 carrier premium was $27 billion. To put the data in perspective it is necessary to examine the number of complaints for each dollar of premium collected.
The most complaints received by any carrier was 26. Top 25 index annuity carriers having no FIA specific complaints were Jefferson-Pilot, RBC, Great American and Union Central. 

In 2005 there were 176 closed customer complaints specifically reported on variable annuities, which is one complaint for every $729 million of premium. This was better than the 181 closed customer complaints reported in 2004 and the one complaint for every $676 million. In 2005 there were 104 closed customer complaints specifically reported on index annuities or 1 complaint for every $259 million of premium. This was worse than the 35 closed complaints reported in 2004, that represents one complaint for every $614 million.

On a per dollar of premium basis there were 3 FIA complaints for every 1 VA complaint

To look at this another way, in 2004 the number of complaints for both index and variable annuities were roughly equal – 1 complaint for each $614-$676 million of sales. However, in 2005 there was one complaint for each $259 million of index annuity premium and one complaint for each $729 million of VA sales. Looking at it from a complaints per dollar of premium ratio the index annuity reported three complaints for every one variable annuity complaint. If you examine all of the index annuity players for 2005 the number of complaints only increases by one to 105 and the ratio remains one complaint for each $259 million of premium.

2005 Sales Per Complaint Top 10 FIA Sellers (a higher average premium means fewer complaints)

Jefferson-Pilot  $   no complaints  Caveats
On a per dollar of premium basis there were 3 FIA complaints for every 1 VA complaint

To look at this another way, in 2004 the number of complaints for both index and variable annuities were roughly equal – 1 complaint for each $614-$676 million of sales. However, in 2005 there was one complaint for each $259 million of index annuity premium and one complaint for each $729 million of VA sales. Looking at it from a complaints per dollar of premium ratio the index annuity reported three complaints for every one variable annuity complaint. If you examine all of the index annuity players for 2005 the number of complaints only increases by one to 105 and the ratio remains one complaint for each $259 million of premium.

Sun Life  $  1,007,243,735
EquiTrust  802,006,536
American Equity 537,792,000
ING  507,565,347
Allianz  338,162,923
F&G  297,852,218
Jackson National Life 259,456,183
Industry Average  259,128,354
Midland National Life 212,433,333
AmerUs/Amer Investors  159,465,696

2004 Index Annuity Complaints (5/05)  
I have noticed allegations are made from time to time, usually by competitors offering other products or services, that index annuities have often been inappropriately sold. However, these allegations are never supported or documented.
The National Association of Insurance Commissioners (NAIC) gathers data on customer complaints from all of the state insurance departments. This information is available on the Consumer Information Source (CIS) part of their web site  http://www.naic.org/consumer/ on a company by company basis. I reviewed and totaled the number of closed customer complaints for 2004 relating to index annuities, variable annuities and annuities in general for the entire universe of all of the index annuity writers and the 25 largest sellers of variable annuities. I was able to find individual complaint statistics on each company.

The top 25 variable annuity issuers were responsible for $122,393 million in new VA sales in 2004. The top 25 VA writers accounted for over 95% of total VA business.1 The number of variable annuity specific closed customer complaints was culled from the CIS site on the top 25 VA carriers   The entire universe of 35 index annuity carriers generated $23,324 million in 2004 index annuity premium. The number of index annuity coded closed customer complaints was determined for each carrier. 

 

2004 Variable Annuity (Top 25 players)

2004 Index Annuity (All 35 players)

# of Complaints            181 38
Most Complaints          55 9
Least Complaints 0 (1 carrier) 0 (22 carriers)
Average Complaints 7.24 1.09
Sales/Complaint $676 Million $614 million

There were 181 closed customer complaints against the 25 top variable annuity writers, or an average of 7.24 complaints per VA carrier. The most complaints against a VA carrier were 55; one VA carriers had zero complaints. The median number of complaints was 5. There were 38 closed customer complaints against all 35 index annuity writers, or an average of 1.09 complaints per index carrier. The most complaints against an index annuity carrier were 9; 22 index carriers – or 63% of the total – had zero complaints. The median number of complaints was 0.  

On the VA side there were $676 million of sales for each complaint. On the index annuity side there were $614 million of sales for each complaint. The variable annuity side had fewer complaints per dollar of premium.  

In 2003 index annuity carriers had 30 complaints against $14,015 million of premium ($467 million for each complaint) and in 2002 index annuities had 16 closed complaints against $11,674 million of sales ($729 million for each complaint). I was unable to determine variable annuity complaints for the top players for these years. Although there were 38 index annuity complaints and 181 variable annuity complaints in 2004 there were 895 closed complaints against traditional fixed annuity insurers.  

What conclusions can be drawn? Based on closed consumer complaints there does not appear to be support for the contention that index annuities have more market conduct consumer problems than other type of annuities.  

1. Carey, Rick. Variable Annuity Sales Reached A Record $128.4 Billion In 2004. National Underwriter (v.109, No. 9 pp. 6-7)


 

Copyright 1998-2013 Jack Marrion, Advantage Compendium Ltd., St. Louis, MO (314) 255-6531.  All information is for illustrative purposes only, does not provide investment or tax advice. No index sponsors, promotes, or makes any representation regarding any index product. Information is from sources believed accurate but is not warranted. Advantage Compendium neither markets nor endorses any financial product.