Posted on September 28, 2018

Washington, D.C. – An official with the Securities Exchange Commission (SEC) indicated this week in Congressional testimony that the agency’s staff is working on possible rules to provide investors with more user-friendly disclosures about variable annuity products.

In written testimony before the House of Representatives Committee on Financial Services, Subcommittee on Capital Markets, Securities, and Investment Dalia Blass, Director of the SEC’s Division of Investment Management, said the Division is considering a recommendation that the Commission propose rules designed to provide investors with more user-friendly, layered disclosure about variable insurance products.

The Insured Retirement Institute (IRI), which has championed this issue for several years, expressed optimism that the SEC would move quickly to issue proposal for public comment. IRI research shows that 95% of investors would prefer to receive a shorter paper summary prospectus if full prospectuses with all the details are available online or upon request.

“We appreciate Director Blass’ recognition of the benefits a summary prospectus rule would provide for investors,” said Cathy Weatherford, IRI president and CEO.

High investor demand for a variable annuity summary prospectus is understandable given full variable annuity prospectuses can range from 150 to 300 pages, and contain voluminous legal, actuarial, and regulatory language that is difficult for investors to comprehend. As a result, full prospectuses are not used by most investors, with less than 3% of investors saying they always read some part of the prospectus and questions by most consumer experts as to whether these investors may be confusing other product informational materials with the prospectus.

“A Variable Annuity Summary Prospectus Rule would address these issues by providing a layered approach to disclosure starting with a concise, plain-English summary prospectus document that provides investors with key information about a products’ benefits, costs, and risks in an easy-to-read format that enhances the investors’ decision-making process,” Weatherford said. “An investor who wants more details at any point can either ask his or her financial advisor for additional information, the approach most investors will take, or access the full prospectus online or in hard copy upon request.

“A variable annuity summary prospectus would improve consumers’ understanding of their investment choices and reduce regulatory burdens by streamlining disclosures to facilitate better decision-making regarding lifetime income options,” Weatherford added. “We urge the Commission to move quickly to advance these common-sense rules and disclosures.”

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Contact: Dan Zielinski