Victory for the Variable

The hottest fight in the insurance business rages around the variable annuity, which would match payments to the rise or fall in 'the cost of living. To do so, insurance companies would have to invest in common stocks to benefit from increased dividends in boom times when the cost of living is on the rise. While huge Prudential Insurance Co. plumped for the variable annuity, Metropolitan and others opposed it, arguing that a drop in stock dividends--and a cut in annuity payments --would shake public confidence in insurance. The Securities and Exchange Commission got into the act, contending that it had the power to supervise any such plan, and joined with the National Association of Securities Dealers in a test case to stop the sale of unregistered variable annuities by two small insurance companies.

Last week SEC lost the test. District of Columbia Federal Judge Robert N. Wilkin held that SEC had no authority to supervise variable annuities, since Congress has given the states and the District of Columbia full power over all aspects of the insurance business.

By throwing out the SEC suit, Judge Wilkin may have helped to melt some of the solid opposition to variable annuities in most states. Only Arkansas, West Virginia, Kentucky and the District of Columbia have so far licensed home-based companies to sell the policies. With the precedent of a court decision, state insurance commissioners may well regard the variable annuity with a kindlier eye. Meanwhile, the two victorious District of Columbia companies, Variable Annuity Life Insurance Co. and Equity Annuity Life Insurance Co., plan to step up their selling campaigns.

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