by John Darer CLU ChFC MSSC CeFT RSP CLTC
When Big Risk Big Rewards No Longer Makes Sense But Neither Does Annuity.org's Advertising
Annuity.org's is feeding its Ying by heavily promoting annuities, using the tag line "When Big Risk Big Rewards No Longer Make Sense" at the same time it is feeding its Yang by (1) soliciting structured settlement annuitants to part with their structured settlement payments for what amounts to pennies on the dollar and (2) lists its top MYGA offering as a 10 Year fixed rate of 6% from a B++ rated company.
A multi-year guaranteed annuity, or MYGA, offers a predetermined and contractually guaranteed interest rate for a fixed period of time.
According to A.M. Best a B++ rating represents companies that "are stable but have room for improvement. The long-term outlook may be unsure". Synonyms for unsure include lacking confidence, equivocating,..just the type of words that might cause an annuity prospect to question. See 35 Synonyms & Antonyms of UNSURE | Merriam-Webster Thesaurus
Is "may be unsure" a risk? What Do Professonal E&O Carriers Think?
"Virtually all E&O carriers place some type of insurer exclusion on their policies, either in the exclusions section of the basic form or by endorsement. E&O carriers have come to the conclusion that an agent's selection of insurers to represent and place business with is wholly within the agent's control. If the agent places business with a company that has a poor financial rating or no rating at all, E&O carriers believe it is a risk that the agent has assumed. However, the exclusions vary significantly from one insurer to another. Some policies exclude any E&O claim arising out of placement with a low-rated or unrated insurer, even if the insurer is solvent. You need to take a look at your own policy, or any prospective policy, to determine the exact scope of the insurer exclusion.
Ask the following questions. (1) What is the Best rating threshold for application of the exclusion? Some exclusions apply if the insurer is rated less than "B" while others apply a threshold as high as "A-." (2) Does the exclusion apply to claims arising out of placement with such a carrier (a) whether it is insolvent or not (worst) or, (b) when it becomes insolvent, even if the claim against the agency does not arise out of the insolvency (bad), or (c) the insurer's inability to pay a claim due to insolvency (better)? (3) Does the exclusion apply even if the insurer had a favorable rating at the time of placement but later became insolvent (bad), or only if the insurer's rating didn't meet the threshold at the time the policy was placed (better)? (4) Are there any other exceptions to the exclusion? In addition to a Best-rating threshold, many E&O policies include an exception for insurers protected by a state guaranty fund". See Ten Things You Don't Want to See in Your E&O Policy | IIAT #3