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Annuity Searches Far Surpass Actual Application Amounts


Income annuity database CANNEX tracks advisor searches of single premium income annuities, according to Linda Koco of Annuity News.  In the Insurance News Net article, “Advisors eyeball SPIAs valued at over $200,000,” Koco questions why the amounts purchased are so much different than those researched.  On average, these immediate annuities have premiums around $100,000, even though the amount of advisors’ searches was $231,000.  The yearly average maintained the quarterly averages, although the 3rd and 4th quarter numbers were less than those in the first two quarters.

There are good reasons that the searches are for more than double the actual annuity applications though.  First of all, many advisors and clients are putting money into more than one annuity to spread out risk and to stay within state minimum guarantys.  Even though a $200,000 annuity may be recommended to cover a client’s living expenses, that doesn’t mean that each individual annuity application will be for $200,000 or more.  So the advisor is searching for the total amount that their client will need in an annuity purchase, a search that averages $231,000, but they aren’t buying one annuity with that entire amount.

The average age of clients for which the searches were run is 70, 69 for males and 71 for females.  With $200,000 to purchase an immediate annuity, a 69 year old male would receive approximately $1,500 for their monthly expenses.  Almost all of the searches run were for immediate annuities, a full 90% of them.  Clients plan to use non-qualified money from sources like inheritances in savings and investments to purchase their annuity.  Single life annuities accounted for 61% of the searches, joint life accounted for 19%, and period certain accounted for 20%.

According to the IRI, overall annuity account balances are much lower than this report indicates.  Including fixed and variable annuities, 75% of the balances are under $100,000 and 33% are under $20,000.  So even though searches are well over $231,000 and average application amounts are $100,000, annuity balances appear to be significantly less.

Written by Rachel Summit

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