A high-profile U.S. senator said on Tuesday she has launched an investigation into 15 major annuity providers amid concerns about the perks they offer to brokers who peddle the products to retirees.
Massachusetts Democrat Elizabeth Warren said she was concerned about potential conflicts of interest for sellers of annuities, investment products often offered by life insurers and brokerages.
Warren said she asked companies including American International Group, Prudential Annuities and Metlife for details on the incentives they offer brokers who sell the products.
Annuities are popular among retirees because they can offer a steady stream of income. There are a variety of types, including some that provide a guaranteed payout and others whose payout is pegged to the performance of underlying securities.
Warren said a preliminary review by her staff revealed that annuity providers offer everything from cruises and iPads to "diamond-encrusted NFL Super Bowl style rings" as incentives for brokers to sell their products to investors.
Such perks, she said, only underscore the importance of new rules proposed earlier this month by the Labor Department which aim to curb conflicts of interest that could lead brokers to steer retirees into less-than-ideal investments.
The rule would require brokers who offer advice on individual retirement accounts to act in their clients' best interest.
The proposal has been staunchly opposed by the securities and insurance industries, who say it could be too restrictive and reduce investors' access to retirement advice.
"I am troubled by this industry incentive system," Warren wrote in letters to annuity providers. "Annuity agents that are more interested in earning perks than in acting in their clients' best interest can place Americans' savings and retirement security at risk."
Spokesmen for Metlife and AIG declined to comment. A spokesman for Prudential said the company was reviewing the letter and would respond to Warren's inquiry.
Other companies that received letters were: Jackson National Life, Lincoln Financial Group, Allianz Life Insurance Company, TIAA-CREF, New York Life, Transamerica, AXA USA, Nationwide, Pacific Life, Forethought Annuity, RiverSource Life Insurance and Security Benefit Life.
A spokesman for the American Council of Life Insurers, whose members include many of the large annuity providers, did not have any immediate comment on Warren's probe.
