Insurance Marketing Organizations (IMOs), also known as independent marketing organizations, financial marketing organizations, or national marketing organizations, may have been misleading the public when it comes to promoting Indexed Universal Life insurance policies (IULs).
First, insurance marketing organizations have been advertising high annual rate of returns on withdrawal benefit riders. For example, an insurance marketing organization may advertise that annually, a client can earn 8% interest rate on Indexed Universal Life insurance policies. However, this advertising may be misleading if insurance marketing organizations fail to mention the restrictions placed on riders that may prevent purchasers of Indexed Universal Life insurance policies from receiving a high rate of return.
Second, the use of the term “uncapped” may mislead purchasers of Indexed Universal Life insurance policies into believing that there is no ceiling to the potential rate of return on an Indexed Universal Life policy. However, no return rate is “uncapped.” In reality, return rates are actually “capped” by spreads, participation rates, or design of volatility controls. The prospected high rate of returns is not high at all.
Third, insurance companies use the “look-back” method where they pick a date in history, maybe 20 years back, when the stock market indices were doing well and there was a legitimate chance of high returns in order to calculate future performances. Basing hypothetical future stock market performance on the past is an inaccurate way of calculating rate of interest return. The stock market today is in a downturn. The high rates from 20 years back no longer apply today. By relying on these misleading projections, purchasers are mislead into believing the stock market indices will perform well today and bring back high returns.
Finally, insurance marketing organizations may use hypothetical indices and compare it to the past, showing how these hypothetically indices can, and will, perform so much better than what actually existed. However, future projections based on these hypothetical indices are unreliable at best and may instill in purchasers of Indexed Universal Life policies a false expectation of high interest returns.
Some sellers of Indexed Universal Life policies include Minnesota Life, Penn Mutual, Midland National Life, AXA Equitable Life, Lincoln Financial, Pacific Life, Transamerica Life, and John Hancock Life.
Before purchasing any sort of annuity, make sure you understand the terms and conditions. Annuities are not right for everyone. If you purchased your annuity in California and would like a free and confidential legal evaluation of it, contact Evans Law Firm, Inc. at 415-441-8669 or email info@evanslaw.com.
