Variable annuities that do not penalize customers who withdraw principal are making their way into the retail market, and Keyport Life Insurance Co. is the latest to offer such a product.

Last week the Boston-based company introduced the no-surrender-charge Keyport Advisor Vista, a level-commission product for sale through bank brokerages.

"Keyport is clearly one of the first of the major providers to go after this market on a retail basis," said Kenneth Kehrer, a consultant based in Princeton, N.J. "Although it's unclear if bank customers will snap up this type of liquid annuity, surrender charges that can run for six or seven years have always been considered a barrier to annuity sales."

Keyport, which sold $595 million in annuity premiums through banks last year, says many who have felt constrained by the charges will embrace no- surrender products.

With the product, customers "feel they have absolute access to their money," said John W. Rosensteel, Keyport president and chief executive.

Removing surrender charges shifts the cost of early withdrawals from investors to the seller of the fund. With Keyport's new fund, a bank seller must return 50% of the commission paid if a customer redeems the principal in the contract's first year.

Originally, insurers were held back by worries that collecting commission returns would be difficult, Mr. Kehrer said. Smaller, independent agents who sold the products could easily duck the insurer and even migrate to other companies' products simply to avoid commission garnishment, he said. But he said he is surprised that larger financial institutions that are prepared to pay have not offered these products sooner.

As to why the products have not gained more attention at banks, James P. Heide, annuity products manager at KeyCorp, Cleveland, said, "One of the things is that brokers kind of have a short-term mentality when it comes to commissions." Often, they are accustomed to more up-front money than some of these products offer, he said.

KeyCorp does not offer a no-surrender variable annuity, but Mr. Heide said it will consider the product after it deals with other matters.

"It's gaining a lot of interest," said Bradley Powell, president of the financial institutions group at Jackson National Life, Atlanta. Jackson introduced its first no-surrender-charge variable annuity, Perspective Advisors, in April. He said some bank representatives are beginning to shift their focus away from up-front commissions.

American Skandia has offered a no-surrender-charge variable annuity, LifeVest, since late 1996, but has attracted only about $179 million in premiums, said Bayard Tracy, national sales manager for financial institutions. He did not offer a reason for the poor sales except to say that the product has since grown in popularity with customers and banks.

For instance, the Shelton, Conn.-based company has developed a proprietary variable annuity with no surrender charges for Wells Fargo & Co. Mr. Tracy said he expects it will be popular with people who already own annuities.

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