April 30, 2024

Warren Reveals Insurer’s Use of Hidden Kickbacks, Slams 15 Largest Annuity Companies for Opposition to New Retirement Security Rule

New Labor Department “Fiduciary Rule” Eliminates Conflicts of Interest, Protects Consumers

“[T]his industry has a particular self-interest in opposing the rule. Insurers and annuity companies are some of the worst abusers of the loopholes in current law...” 

Text of Letters to 15 Largest Annuity Companies (PDF)

Washington, D.C. – U.S. Senator Elizabeth Warren (D-Mass.) wrote to the country’s 15 largest annuity companies, criticizing their opposition to the Department of Labor’s (DOL) Retirement Security Rule and revealing their use of secretive incentives and perks to agents in return for steering consumers toward their products. The recipients include: Allianz Life Insurance, Athene Annuity Life, Brighthouse Financial, Corebridge Financial, Equitable Financial Life Insurance Company, Fidelity Guaranty Life Insurance Company, Global Atlantic Financial Group, Jackson National Life Insurance Company, Lincoln Financial Group, Massachusetts Mutual Life Insurance Company, Nationwide Life Insurance Company, New York Life Insurance Company, Pacific Life Insurance Company, Security Benefit Life, and Symetra Life Insurance Company. The new Retirement Security Rule closes loopholes in the law that currently make these kickbacks perfectly legal. 

An investigation by the office of Senator Warren reveals a deeply troubling pattern of secretive incentives and rewards - from all-inclusive cruises and luxurious getaways in the Caribbean, to $50,000+ cash bonuses - to financial advisors in exchange for promoting their products, even if they are not in the best interests of clients. Examples of vacation perks offered by annuity companies to agents to sell products that may not be the best fit for the clients in 2024 include:

  • A “luxurious and relaxing getaway to a 5+ star private resort” in Playa Mujeres, Mexico, offered by Liberty Bankers Insurance Group, where the agent and their guest can experience “all the Caribbean has to offer” for six days – if they sell $200,000 worth of products.

  • A “luxury Danube river cruise” where agents are invited by the SILAC insurance company to explore Passau, Salzburg, Vienna, and Budapest.

  • A five-day escape to “one of the most privileged locations on the white sands of Punta Cancun” for Washington National, where, “[s]hielded from the open sea by the shores of Isla Mujeres, the Grand Fiesta Americana Coral Beach Cancun offers calm, warm and swimmable waters and irresistible tropical weather.”

These types of conflicts of interest among brokers cost retirement savers as much as 20 percent of their retirement income over a lifetime, and conflicted advice on fixed-index annuities alone can cost savers as much as $5 billion every year. 

Upon the DOL’s release of the final Retirement Security Rule this week, the insurance industry immediately opposed it. Industry groups are spreading misleading information through biased surveys, studies, and dramatized video advertisements to preserve what is a very profitable status quo for them. 

In 2015, Senator Warren opened an initial investigation into the rewards and incentives that the 15 largest annuity companies offered to brokers and dealers selling annuities to families and small investors. The investigation revealed a widespread practice of offering financial advisors trips and other benefits for promoting certain annuities and other insurance industry products, and that those conflicts of interest are intentionally hidden from customers. Now, as the DOL finalized this rule again, a fresh investigation found a vast range of perks in the form of vacations and cash bonuses.

These secret kickbacks hurt consumers by incentivizing agents to sell certain products because they will earn a bigger cash bonus or fancier vacation, not because they are in the best interests of their customers. Other industries have ended this practice entirely: in 2003, for example, the securities industry ended non-cash compensation arrangements in which brokers and dealers were allowed potential conflicts of interest in the stocks and bonds that they recommended for clients. But the annuity industry has refused to end these practices. These kickbacks are a perfect example of why the Biden Administration’s Retirement Security Rule is needed, and will benefit consumers.

Senator Warren is demanding answers about the incentives they offer and their disclosure policies for annuity purchasers by May 9, 2024. 

Senator Warren is a longtime proponent of strong conflict of interest standards and requirements that require sound financial advice: 

  • In January 2017, Senator Warren asked 33 financial institutions whether they supported a roll back of the financial advisor conflict of interest rules, and in September 2017 invoked statements from CEOs that the rule was in the best interest of their customers, while urging then Labor Secretary Alexander Acosta to avoid further delay and implement the new rules.

  • In September 2016, Senator Warren and then-Chairman of the House Education and Labor Committee Congressman Bobby Scott (D-V.A.) released a Government Accountability Office study that underscored the importance of working people having sound investment advice that is in their best interest.

  • In April 2016, Senator Warren publicly advocated for the tougher fiduciary rule in a Huffington post op-ed with Senator Cory Booker (D-N.J.) to argue the urgent need for the reforms.

  • In October 2015, Senator Warren released the findings from an investigation into how perks and kickbacks create conflicts of interest in the annuities industry that showed 13 of the 15 leading annuity providers offered their agents lavish, secretive kickbacks for sales to often-unwitting purchasers, including all-expenses-paid vacations, iPads, professional sports tickets, and more, creating perverse incentives for broker-dealers to sell whatever products reap them the greatest personal reward, even if it comes at the expense of peoples’ savings. 

  • In September 2015, Senator Warren called out Brookings Non-Resident Fellow Robert Litan for his work backed – financially and editorially – by those same special interests opposing the reforms. Litan had testified before Congress in 2015 about a study he authored asserting that the DOL Fiduciary Rule could cost consumers $80 billion, a figure the financial industry amplified in their own arguments against the rule.