Don’t blame insurers for VA contract changes

I read the article “VA customers irate about rule changes” (InvestmentNews, July 22).

Birny Birnbaum, executive director of the Center for Economic Justice, a consumer advocacy group, is quoted as saying, “You have the insurers selling long-term retirement products and then changing the terms midstream. It makes it difficult for consumers to have faith in their ability to fulfill these promises.”

I disagree with him.

Moshe Milevsky, an associate professor of finance at the Schulich School of Business at York University, adds some common sense with his comment that in reality, the insurance company isn’t to blame. Rather, it is the fault of the financial adviser and, to a lesser extent, the client.

Advisers and clients are responsible for understanding what they sell and buy. Advisers are paid very well to sell these products, and the simple idea that Mr. Milevsky presents is that for the compensation paid, the adviser has a job to do, and that job includes understanding not only the good but the bad in these complex contracts.

We, as a society, continue to create an atmosphere of personal nonaccountability and the idea that someone else is always to blame for our misfortune. The reality is that these products are regulated and either approved for sale or not.  

If approved — sometimes with comments or changes that are required — the contracts include all possible actions that the insurance company can and can’t do. The idea that the company can “change the terms midstream” is ludicrous, and again, shame on those who try to paint the picture as such.  

The company can only do what the contract and prospectus allow it to do — no more and no less.

If the company really wanted to change midstream, it would require a new filing with the regulators and approval by the appropriate agencies.

Frankly, it is tiresome to read comments such as those from Mr. Birnbaum and others, especially the advisers who have been paid quite high commissions to sell the products. It ultimately is their responsibility to know, understand and convey the rules to the client.

If the client’s goal was to add to the contract over time, he or she should have been made aware of the full set of rules pertaining to the product.

“It’s frustrating, and it affects the ability to help the clients,” Mitchell Kauffman, an adviser at Kauffman Wealth Services, a firm that is affiliated with Raymond James Financial Services Inc., is quoted as saying in the article.

Well, Mr. Kauffman, that is on you. Your clients trusted that you understood the rules when you were paid handsomely.

It is on you, not the insurance company, to understand and explain all possible actions the carrier can and can’t take.

The frustration should be on the part of your clients, and that frustration should be directed at you and not the company.

I am not trying blindly to come to the defense of the insurance companies. We all know they are capable of treating customers harshly, sometimes unfairly.

Nor am I trying to pick on Mr. Birnbaum or Mr. Kauffman. I am simply trying to point out that making the insurance company the villain here is rather lazy, shortsighted and very, very unfair and misleading.

We all need to take more responsibility, especially those of us being paid to sell these products. Don’t take the compensation unless you take on the responsibility that goes with it.

Kevin W. Baker

President and owner

American Annuity -Consultants LLC

West Hartford, Conn.

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