Are regulators ALWAYS looking after consumer's best interests?

Updated: Sep 3

Today, I received an email notification from a large annuity insurance company. It was based primarily on compliance and regulations, but this line really stood out to me: California only: Unfortunately, the Nursing Care and Terminal Illness Rider will no longer be available on any [insert insurance company name here] products.

This company is not the only one. I've looked with many companies and the vast majority of companies have discontinued these riders for California residents. These waivers of surrender charge or other riders are MEANT for the client to have access to their annuity funds without surrender charge - a client benefit.

Why on earth would a regulator prevent such a client benefit?

I have a theory.

They want there to be an obstacle to the insured or annuitant to AVOID touching these assets. Why? 1) So they can be taxed as ordinary income upon withdrawal each year for the life of the insured. (Granted - qualified medical expenses are tax-deductible, but check with your tax professional.) 2) So that those who INHERIT these accounts will pay full ordinary income tax upon withdrawal WITHOUT having a qualified medical expense to offset that tax. If your adult children inherit these accounts, these accounts will be fully taxable at THEIR TOP TAX RATE, rather than being taxed at the potentially lower taxes of the retiree.