Friday, January 05, 2007
New Research Suggests Variable Annuities May Be Dangerously Underpriced
Years ago, Moshe Milevsky was loved by all who disliked variable annuities. In a landmark study in the mid 1990s, the York University finance professor showed that variable annuities, which at the time offered mainly a guaranteed minimum death benefit, were overpriced.
At the time, Milevsky showed that insurance companies paid just 5 to 10 basis points, a fraction of 1%, to cover the cost of the guaranteed minimum death benefit -- but charged annuity holders upwards of 1.7% for what are called mortality and expense (M&E) fees.
New Research Suggests Variable Annuities May Be Dangerously Underpriced
Source: Market Watch
At the time, Milevsky showed that insurance companies paid just 5 to 10 basis points, a fraction of 1%, to cover the cost of the guaranteed minimum death benefit -- but charged annuity holders upwards of 1.7% for what are called mortality and expense (M&E) fees.
New Research Suggests Variable Annuities May Be Dangerously Underpriced
Source: Market Watch
Permalink posted by armandn @ 12:11 PM 
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