A report from the Massachusetts senator's office says kickbacks and incentives to push certain products are prevalent in the industry and conflict-of-interest disclosures are insufficient.
Democratic Senator Elizabeth Warren of Massachusetts has taken aim at the insurance industry's kickbacks to agents and financial advisors, arguing that their prevalence demonstrates the need for the Department of Labor fiduciary rule that was stayed by a court this summer.
In an investigation of the industry launched in April of this year, Warren's staff found that at least 29 annuity and insurance companies incentivized the sale of their products with "secret perks in the form of vacations and cash bonuses" in 2024, according to a report released this week.
For example, Liberty Bankers Insurance Group offers financial professionals who sell $200,000 worth of its products a "luxurious and relaxing getaway to a 5+ star private resort" in Mexico, while SILAC offers a "luxury Danube river cruise," according to the report.
Other perks include a five-night trip to Venice and a one-week vacation in Australia, Warren's office said.
The investigation also found a variety of cash bonuses, ranging from 75 basis points for the sale of certain products by Americo Financial Life and Annuity Insurance Co. to as much as $54,000 on net weighted premiums of as much as $300,000, offered by Equitrust.
The report further claims that many of the companies involved, while touting that they disclose conflicts of interest, "hide behind dense, inadequate disclosures."
Warren's office cites a July 2024 U.S. Government Accountability Office report -- which analyzed more than 15,000 disclosures and conducted undercover calls to 75 investment advisors -- that found such disclosures "were generally written at an above college graduate reading level."
"The annuity industry's efforts to obscure its pervasive use of kickbacks and perks reveal why the DOL's Retirement Security Rule is needed -- and how it will protect consumers," the report said. "The industry's 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 their client's best interest."
The DOL's rule, which would have extended fiduciary status to more professionals and activities, was slated to go into effect this week. However, in late July, the U.S. District Court for the Eastern District of Texas stayed the rule, siding with the Federation of Americans for Consumer Choice and three individual insurance agents licensed in Texas, which had filed a suit to kill the rule.