The annuity industry is evolving with the times, and according to a recent article from InsuranceNewsNet, retail life and annuity agents and financial advisors can expect significant changes to these products. Simpler annuity structures, more fee-based annuities and fewer rides and income guarantees are just a few of the changes predicted by industry experts.
The days when annuities giants pumped out an “overwhelming volume of complex, tough-to-understand annuity products are gone,” said vice president of research and consulting with Novarica, Chris Eberly. Instead, insurers are focused on “a few key blocks of business and simplifying products within those blocks.”
In this low interest rate environment and new regulations targeting retail clients, insurers are focused on income needs rather than what companies can sell.
“It’s the end of the shotgun approach to sales,” Eberly added.
The latest predictions have come from several weeks of interviews with the IT departments responsible for product development by Novarica, an insurance IT consultancy. Eberly’s research results appear in the “Emerging Trends in Annuities” report that was published this month with his colleague senior associate Harry Huberty.
The report predicts that more fee-based annuities will come to market faster and with more transparency in how agents are paid. These changes are expected to affect products in both variable and fixed annuity segments, both of which saw declines in the first quarter. According to the market tracker LIMRA Secure Retirement Institute, first quarter variable annuity sales dropped 8% to $24.4 billion from this time a year ago, while fixed annuity sales dropped 15% to $27.6 billion during the same period.
As companies decide which distribution channels suit their needs the best, agents should also expect insurers to favor some over others.
“By and large, insurers are prioritizing based on what has traditionally been their strongest (distribution) suit,” Eberly said.
Some insurers have “doubled-down” on their traditionally preferred channel, while others seem to be drawn to the bank and broker-dealer channels. Others are choosing to expand their relationships with registered investment advisors (RIA). This particular channel is drawing more attention because they are growing rapidly and are more profitable, capturing more assets faster than other channels.
Index Protector 7, the fixed indexed annuity launched last year by Great American Insurance Group of Cincinnati, has so far found 50 RIA distributors. Eberly said that insurers are hitting the independent channel because they don’t have a large captive distribution network, or because they know their captive agents aren’t getting any younger and looking to retire.
“I’ve not come across a carrier saying we’re dumping our captive and going RIA, but I have come across carriers saying we have a captive but we want to grow our RIA,” he added. Insurers have started to realize that RIAs are the ones capturing the assets “so they are saying let’s use that as a market channel for us,” he said.
Written by Rachel Summit