Insurance company sales representatives are vying for banks' attention with a newfangled fixed annuity they say is the future product for bank customers.

Fixed annuities that link their investment performance to a stock index such as the Standard & Poor's 500 are the new rave among insurers. A host of companies have introduced them to banks in recent months, and others plan to roll their versions out in the fall.

Insurance sales representatives insist that these products are well- suited for traditionally conservative bank customers who want guarantees, but who long for the potential gains of the stock market.

But bankers and consultants say that are uncertain that these annuities will actually sell in banks.

"Some of these index annuities are difficult to explain to customers - or even for a broker to understand," said James Eads, president of the brokerage at Signet Bank Corp. in Richmond, Va.

They are designed as fixed annuities and guarantee principal as well as a return, almost always 3%. But the annuities also try to take advantage of the stock market by mimicking various stock indexes.

"It's a wonderful opportunity to enjoy the ups of the stock market without having to take the risk," said John Philip Sousa 4th, who oversees sales of annuities to banks at SunAmerica Asset Management Corp.

SunAmerica introduced its annuity to banks this summer, following Keyport Life Insurance Co. in Boston and Lincoln Benefit Insurance Co. in Lincoln, Neb.

Among the companies that plan to debut index products this fall are Jackson National Life Insurance Co. in Lansing, Mich., and Lincoln National Life Insurance Co. in Fort Wayne, Ind.

"There's still a pretty large niche of bank customers who stay out of the stock market because of the downside risk," said Kenneth Hughes, a senior vice president overseeing annuity sales through banks at Keyport. With this product "you get the same guarantees and protection of a fixed annuity."

The problem for banks and other brokers, however, is that every insurance company means something different when it says its product tracks an index. At Signet, Mr. Eads said one product he looked at tracked the S&P by relying on a method called the "Asian formula."

"I don't understand this formula, and I got an 'A' with distinction in probability statistics in college," he quipped.

Even those who design such products agree that agents might see an unnecessary backlash from customers who get lower returns than they expected.

"It isn't a smoke-and-mirrors product," said David Shapiro, a consultant in Los Gatos, Calif., who created the first index annuity for Lincoln Benefit in 1992. "But one of the challenges the industry faces is to make sure the people who sell them know what these products do and don't do."

Mr. Sousa countered, "Even the most complex products I've seen, quite frankly, aren't that complex." He said SunAmerica designed its product to be simpler to understand than its competitors' versions.

Keyport and SunAmerica are both heavily promoting their products to banks. They both guarantee customers a 3% interest rate and they both track the S&P 500. But each product monitors the S&P in a vastly different way.

Keyport's product works like this: Suppose a customer enters a contract on Aug. 27, 1996, that ends Aug. 27, 2001. Keyport will watch how the S&P performs on all the anniversary dates during the contract's performance, and base the customer's payout on the day when the S&P performed the best.

SunAmerica says its approach is simpler. Let's say a customer invests in a seven-year contract with that company. SunAmerica's payout is based on the average of the S&P's return during the contract's duration.

The two products differ on another important feature. Keyport customers only get 80% of the gains in the contract. But SunAmerica customers get 100%.

One insurer explained these products remain a conservative fixed annuity, and are not for customers who watch the stock market.

"If they don't like the definition of how we match the S&P 500, the investment rep's alternative is to say 'I've got a mutual fund for you,'" said Keyport's Mr. Hughes.

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