While one of the most vehement arguments against index annuities is the high commission charged, the rates are coming down dramatically.
In 2000, average commissions paid were 10.9%, according to the Advantage Group. Over a third of sales in June 2002 were for products with commissions over 11%, but a year later only three products even offer a commission over 10%.
Three-quarters of index annuity carriers have already chosen to lower commissions, pull the plug on products, and/or make adjustments to bonuses. This trend is only going to continue, with three more carriers intending to revamp commissions in July.
The reassessment of commissions is related to the drop in interest rates and carriers need to rationalize product pricing. Many carriers have found that producers would rather reduce commissions than offer more paltry benefits or bonuses to consumers.