In an effort to address regulators' concerns about banks' annuity sales practices, some insurers have begun offering certification courses for bankers who sell their annuity products.
Jackson National Life Insurance Co. in Lansing, Mich., mandates such a course for all non-securities-licensed advisers who sell its index annuities, said Steve Kluever, a senior vice president of product management in the company's distribution arm.
A second company, ING U.S. Financial Services in Atlanta, has a certification program it does not make mandatory for its bank partners.
For Jackson National's program, bankers take a test with 32 multiple-choice questions about specific features of the insurer's index annuities; they must score 80% or better to be certified by Jackson National to sell the products. Jackson National, which is owned by Prudential PLC of London, mails an index annuity guide that can be used as study material to bank representatives along with the test. The bankers can then mail or fax the completed test back to the insurer.
"Particularly in the bank channel, we try to do an awful lot of education … to make sure they understand the products they are selling," Mr. Kluever said. "It helps us understand from our perspective that the people selling the products really understand them."
Jackson National issued index annuity due diligence kits Jan. 1 to help banks identify which products are appropriate for certain customers, Mr. Kluever said. It has been offering annuity-related training to banks since before the National Association of Securities Dealers issued guidance on index annuity sales practices last year, he said.
Requiring bankers to complete certification courses for selling annuities is "not common, but it's emerging as a best practice in the [insurance] industry," said Kenneth Kehrer, the president of Kenneth Kehrer Associates, a bank insurance consulting firm in Princeton, N.J.
The U.S. unit of ING Group NV of Amsterdam also offers a certification program for banks that sell its annuities, said Dana Ripley, a spokesman, though the company does not require its bank partners to complete it. He declined to give details about the bank program, saying ING is just beginning to roll it out.
"ING has a comprehensive platform of training and education programs for banks to choose from," Mr. Ripley said. "ING's new certification program is one program for our bank partners to select. It is the bank's choice to utilize the certification program."
Jackson National has also sought to address compliance concerns by offering banks a wider array of annuity products and features, Mr. Kluever said.
"Flexibility and choice is the right thing to do for advisers so they can customize a financial plan for individual clients that meets clients' particular needs," he said.
The company announced on Monday that it was adding several features to its index annuity portfolio and launching two index products. One, Elite Choice Rewards, lets buyers get 5% of the annuity contract's value immediately. Both products offer a variety of crediting methods.
But expanding the product menu can be a double-edged sword for insurers, Mr. Kehrer said. Companies that offer a plethora of annuity features may confuse both advisers and their clients, he said.
"The door swings both ways," Mr. Kehrer said. "Choice is good, but choice can be confusing for the customer and the adviser. One concern that we have about index annuities and variable annuities is their complexity and the capacity of the bank sales force to handle that complexity."
Several insurance companies expanded their bank education offerings in recent months, largely in response to an investigation by the Securities and Exchange Commission and National Association of Securities Dealers that found unscrupulous variable annuity sales practices in the industry. The regulators expressed concern that brokers were taking advantage of senior citizens who did not fully understand annuity contracts' nuances.
NASD issued a warning letter in 2003 and proposed regulations in 2004 that emphasized determining variable products' suitability for the customers to whom they are being sold.
Nationwide Financial Services Inc. in Columbus, Ohio, said in November that it had expanded its compliance education program for banks, offering in-person annuities training and a Web site to let banks track annuity sales activity. And Symetra Life Insurance Co. in Bellevue, Wash., said the same month that it was strengthening its bank compliance program to offer suitability education in partnership with a Seattle training and consulting firm.
