New TowerGroup Analyst in Insurance Practice Examines Challenges of

Monitoring and Determining Annuity "Suitability"

    NEEDHAM, Mass., Sept. 27 /PRNewswire/ -- Aggressive moves by state
 attorneys general to hold insurance companies responsible for annuity
 suitability are poised to drive major changes in how the insurance industry
 approaches this class of products. "Suitability" refers to the
 determination of whether the terms of a specific annuity product offering
 are appropriate to a given individual, based on factors such as his or her
 age, financial and tax status, and desired investment outcome. A recent
 spate of lawsuits against insurance companies and their brokers for selling
 what the lawsuits deem "unsuitable" annuities to senior citizens is fueling
 increased regulatory demands.
     (Logo: http://www.newscom.com/cgi-bin/prnh/20070806/TGLOGO )
     New research from TowerGroup finds that insurance companies who
 proactively evaluate and implement systems for monitoring annuity
 suitability beyond current regulatory requirements will not only reduce
 their risk of being on the receiving end of litigation - they will help
 consumers feel more comfortable with annuity products and enhance the
 industry's reputation.
     The author of the research is Rachel Alt-Simmons, a senior analyst and
 the newest member of the TowerGroup Insurance research practice. "Insurers
 and their distribution partners must find ways to improve the sharing of
 compliance and suitability information in order to address current
 challenges," said Alt-Simmons. "Leveraging business intelligence
 technologies is one critical way that these organizations can better
 proactively identify macro trends and risks, allowing them to more
 effectively service their customers."
     Highlights of the research include:
     -- To reduce litigation risk, many insurers and broker-dealer firms are
        rapidly adopting rules proposed by the Financial Industry Regulatory
        Authority, referred to as the "model law." They are doing so before
        these rules are mandated, just as they are "pre-adopting" rules
        proposed by individual state regulators demanding higher levels of
        suitability screening. However, the pending rules still leave
        implementation open to interpretation, which is causing the industry to
        scramble to figure out to standardize the definition of "suitability."
     -- TowerGroup expects that the increase in new offerings like life
        settlements, and hybrid insurance/securities products such as those
        indexed to the financial markets, will drive increased regulatory
        scrutiny and confusion over which agencies hold jurisdiction over which
        products.
     -- Although standards in annuity processing will go a long way toward
        increasing suitability enforcement by cutting down the current chaos of
        paperwork and manual effort, TowerGroup anticipates that new standards
        will quickly be pulled apart as insurers demand customization.
     -- The implementation of traditional business intelligence software
        solutions is essential to better understand and interpret the behavior
        of the broker, selling organization, and end consumer. The increased
        transparency of business processes provides opportunities to mitigate
        compliance risk.
     Prior to joining TowerGroup, Alt-Simmons served as the Director of
 Business Intelligence for the US Wealth Management Division of Hartford
 Life. Her expertise includes implementing analytic capabilities throughout
 organizations, identifying and developing information management and
 stewardship programs, data warehousing, project/program management, and
 best practices in IT/business alignment. At TowerGroup, Alt-Simmons covers
 a broad range of issues related to annuities, retirement plans, mutual
 funds, college savings plans, and life insurance product lines.
     The TowerGroup research report titled "Annuity Suitability: The Ball's
 in Everyone's Court," is available to qualified members of the press for
 review. Those interested in purchasing a copy of any TowerGroup report or
 subscribing to a TowerGroup research service may call +1.781.292.5200 or
 email service- info@towergroup.com.
     Sign up for bi-weekly newsletter, TowerGroup News, to stay informed on
 the latest research and events. To learn more, visit:
 http://ui.constantcontact.com/d.jsp?m=1101074606706&p=oi
     About TowerGroup:
     TowerGroup is the leading research and advisory services firm focused
 exclusively on the financial services industry. A respected source for
 trusted information and advice, TowerGroup brings many of the world's
 leading financial institutions, technology companies, and professional
 services firms a deeper understanding of the business and technology issues
 impacting their organizations. Headquartered near Boston in Needham,
 Massachusetts, and with offices in North America and Europe, TowerGroup
 serves a global client base. Visit www.towergroup.com for more information
     Contact:
     Rachael Adler
     radler@cooperkatz.com
     +1-212-455-8037
 
 

SOURCE TowerGroup

Back to top