Claims for Insurance Investment Products
These insurance based investment products are often complex and regularly misrepresented investments where promises of guaranteed returns or returns with safety of principal are made without a fair and balanced explanation of the costs and ongoing fees for the products. This often results in investors being left with an investment that remains flat or even loses money despite lofty promises to the contrary.
If you were sold one of these products and believe it was not right for you or was misrepresented to you, you may have a claim, contact us by completing our online form or calling us directly at (414) 755-5020.
Our firm will not collect compensation for your case until it is settled or we win at trial. We do not collect a fee unless we win your case.
Understanding Your Investment Professionals Duties
FINRA has provided significant guidance concerning a broker-dealers’ responsibility for supervision of the sale of life insurance products and investment strategies sold as investments. In NASD Notice to Members 05-50,[1] the NASD (now known as FINRA) provided guidance in connection with equity-indexed annuities. NASD was concerned about the way associated persons were marketing and selling these insurance investment products and was further concerned about the absence of adequate supervision of sales practices, specifically addressing the following types of claims in sales literature:
- What if the market goes down and you would lose nothing? The market goes up-you gain!
- A Win/Win Investment Vehicle!
- If you’re looking for upside potential and no market downside look no further than [name of EIA]. This fixed annuity enables you to make the most of S&P 500 Index gains
- Growth Potential without Market Risk
Notice to Members 05-50 is clear that the unsupervised use of such sales material could confuse or mislead investors, noting that “[i]f sales pieces containing these statements were deemed to be broker-dealer communications with the public, then they would be subject to the NASD advertising rules, and would have to provide a balanced description of the features and risks of the product.” FINRA Notice to Members.
Types of Insurance Investment Products
Variable Annuities: Variable annuities, products which combine a security and an insurance contract, are another type of investment which is also generally illiquid. It is important to understand that in some cases, deferred tax status can be a benefit. However, clients often purchase variable annuities in an IRA or 401k, meaning there is no tax benefit. In the end, these illusory benefits are far outweighed by the costs and fees.
Indexed Annuities: FINRA describes Indexed Annuities as “Many indexed annuities are tied to broad, well-known indexes like the S&P 500 Index. But some use other indexes, including those that represent other segments of the market. Indexed annuities expose you to more risk (but more potential return) than a fixed annuity but less risk (and less potential return) than a variable annuity. As a result, the return on these products may be higher or lower than the guaranteed rate of return on conventional fixed annuities.”
Variable Life Insurance (VUL): Variable life insurance is an insurance policy that is subject to regulation under state insurance and federal securities laws (unless otherwise indicated, references to variable life insurance include both scheduled premium variable life insurance and flexible premium variable universal life insurance). Similar to traditional life insurance, variable life insurance offers a death benefit that represents the amount the life insurance company is obligated to pay upon the death of the insured. In addition to the death benefit, variable life nsurance generates an investment element usually termed the “cash value.” However, the insurance company that issues the variable life insurance policy does not guarantee the cash value. The cash value and in some cases, the death benefit, can fluctuate based on the performance of investment portfolios maintained by the insurance company in a segregated or separate account, and the interest earned on balances in general account options, if any.
Indexed Universal Life (IUL): The Financial Industry Regulatory Authority (“FINRA”) describes IUL’s as a, “[t]ype of security that falls under the universal life insurance umbrella; however, it follows a set stock index (such as the S&P 500 without dividends) rather than allowing policyholders to choose their investments.”
Common Misrepresentations
- Promising Guaranteed Returns with No risk
- Downplaying the illiquid nature of the investments
- Selling VUL or IUL products as Retirement Planning or Investments rather than Insurance
Discuss Your Case Today
If you were sold an insurance product as an investment, we can investigate the specifics of your case. If you have suffered a financial loss as a result of an Insurance Investment Product, the legal team at Halling & Cayo, S.C. may be able to help you recover your losses. Our firm will not collect compensation for your case until the case is settled. We do not collect payment unless we win your case. Send our office a message or contact us at (414) 755-5020 to schedule a consultation today.