Question: What annuity product trends do you expect to see in the coming year?
“There will be more and more focus on fixed annuities that have minimum guaranteed income riders. Consumers are starting to realize that annuities are the only products that provide guarantees. Even though many carriers have cut back on features in the annuities, everything is relative. These products are still a good deal for the customer. The industry will always have fixed annuities, but the products will always move in response to the prevailing economic environment.”
-- Michael Pinkans, Senior Vice President-marketing, Zenith Marketing Group, Inc., Freehold, N.J.
“Bonused fixed annuities and fixed indexed annuities will be more important. The bonus products pay a bonus into contracts that have been in force for a specified number of years (such as 10 years), and the indexed annuities pay a guaranteed interest rate at today’s rates and offer upside potential (via indexed-linked interest crediting). Products like that will give customers a good rate for the current environment, plus the opportunity to earn more in the future—without having to change out of the policy into a higher earning contract in the event that interest rates spike later on. Clients want stability, and this will give them stability. As for variable annuities, although some carriers have scaled back on their guarantee features, others still offer them, and I expect still others will come back to offering guarantees once they get more certainty about the economy. Even so, carriers can’t design products that are meaningfully generous to the clients. That means that agents will need to search for products that have the features clients want from what is available at the time. And they should look for quality of the company first, before looking for rate or policy features.”
– Gary Dworkin, President, DAI Associates, Inc., Rochester, N.H. and Naples, Fla.
“There will be a spike in the indexed annuity market, because people are looking for higher yields with a fixed floor. Fixed rates are so low, what has the client to lose with these products? If the client thinks that interest rates will be up in the next three to four years, to the point that the interest crediting in the product goes up to the cap, the interest crediting will still be where most fixed annuity rates will be at that time. If the rates go up a lot, the lower caps on the indexed policies sold when interest rates were lower could be a concern. Still, agents need to sell what is available now. As for traditional fixed annuities, their interest rates will likely continue to be very low next year. But if the alternate option is a CD or a bank savings account, the fixed annuity is still a good option for customers who don’t need the money for three to four years or for the length of the surrender charge period. That’s because there is no downside in these products and even if interest rates go up, the bank products will still lag behind what traditional fixed annuities will offer. As for variable annuities, people don’t like to have a bad year and see a negative account value; since volatility in the stock markets is likely to continue next year, many people will prefer the indexed annuity, because it will never have a negative value.”
– Greg Schwabe, National Marketing Director, First American Insurance Underwriters, Needham, Mass.