"Guaranteed" Variable Annuities Renege on Their Guarantee

Some so-called "guaranteed" variable annuities will apparently renege on guarantees made to customers. They're reneging because they're afraid the guarantees will hit them hard at some point - maybe soon.

Life insurers in the U.S. face charges against earnings potentially totaling billions of dollars from miscalculations about the number of customers who would exercise lifetime-income guarantees sold with the retirement products known as variable annuities...

What's disturbing here is that a guarantee was made in a contract (which is what an annuity is), and now that guarantee, arguably one of the key reasons people invested in the annuity in the first place, will no longer be honored. No surprise, but the customer gets screwed here.

Would you do business with companies that don't honor their commitments? Of course not. But it looks like one company, Hartford, will unilaterally renege on their guarantee without any attempt at compensating their customers

(Hartford) is requiring owners of certain of its guarantees to move at least 40% of their money into bond funds—and lose their guarantee if they fail to transfer the money out of stock funds.

But you know what? I'll bet they get away with this. Not only that, but other customers will come along and do business with them in the future. Isn't that incredible? Again, would you do business with a company that made a strict guarantee and then simply reneged on the guarantee? I certainly hope not. But I "guarantee" many people (sheeple?) will.

You know, lately I'm really feeling like people have gotten so apathetic, they'll basically put up with any sort of abuse. Sure, they may bitch and moan about things, but in the end, they put up with this sort of behavior, just like those who have decided that it's perfectly fine for the NSA to illegally snoop on their phone calls. And you wonder why we're in the mess we're in.

But here's something else: even the so-called "professionals" were taken in by a guarantee that should never have been taken seriously:

Some financial advisers say they worry that clients they aren't able to reach will inadvertently lose the valuable guarantees, possibly exposing the advisers to litigation.

Did it ever occur to these people that a company "guaranteeing" a rate of return on a product funded by stock investments, no matter whether or how much money the stocks lost, were making a guarantee that was imprudent? Maybe they thought the company would somehow "hedge" themselves with some fancy derivatives. But if they did, why would you want to recommend a product to your customers that - for it to succeed - would rely on derivatives? Did they tell their customers they were buying something that relied on derivatives?

Look, when something sounds ridiculous like, "I'll pay you a guaranteed return on your stocks no matter how far they fall in value," you can't just put your money into something like that, can you?

Then again, I guess some people can and do.