It's not that people don't want to save for retirement, it's because they can't afford to.
By Linda Koco
As the New Year’s stardust settles, annuity watchers are scanning the horizon to see what lies ahead for annuities in the next 12 months.
Though no one can predict with certainty what the future will hold, here’s a little exercise that might help jump start the wondering: Compare product development for the previous year with sales results in the current year.
Here’s the rationale: Products that were put into play in the previous year have a good chance of being the ones that get sold in the coming year. And if one product line, such as indexed annuities, has more new products coming out in a given year than other product lines, it might be that this line will turn sales heads in the subsequent years. In this sense, this is no different than cars or computers; when the new models come in, the old models are retired and one or more of the newbies start to climb the sales charts.
If that is the case with annuities, perhaps it will behoove the annuity professional to keep tabs on the new product rollouts of the previous year -- to gain insight to the competitive climate for the coming year. For instance, in year one, if there is a flood of new rollouts in, say, the deferred income annuity market, might the annuity professional need to plan for more deferred income annuity sales and competition in year two?
Check out the 2011/2012 relationship
Let’s see how such an analysis might work. The comparison will be between annuity debuts in year 2011 to annuity sales results in 2012.
Cautionary note: The 2011 product debut numbers discussed here do not include every single annuity that rolled out that year. Rather, the numbers come from a list informally collected from daily news feeds, e-mailers, articles, industry buzz and other resources.
According to the LIMRA sales numbers, the only product line to show growth in sales for the first nine months of 2012 was indexed annuities. As annuity professionals know, the year was a rough one for the annuity business. Indeed, total estimated sales for the nine months were off by 8 percent compared to 2011, according to LIMRA. Even so, indexed annuity sales managed to grow by 6 percent compared to the same nine-month period last year.
Now, let’s see how this compares to product development activity during the year before. The annuity debut list mentioned above shows that there were more debuts of indexed annuity products (31 entries) than any other type of product during 2011. (To reiterate, this is an informal collection of debuts, not inclusive of all debuts that occurred nationwide in 2011, so the comparison should be taken as a point of interest and not a sure-fire indicator.)
This may suggest that there is some kind of correlation between volume of new rollouts and sales in the subsequent years.
By comparison, the second biggest product type in terms of product development was variable annuities, of which 25 debuts made the list. According to LIMRA’s numbers, variable annuity sales estimates for the first nine months of 2012 were down by 7 percent compared to the year-earlier period.
What about income products
Now for a word about income annuity products and retirement income solutions. In both 2011 and 2012, there were plenty of rollouts of such products. However, they were spread over fixed income annuities (also called immediate annuities), and guaranteed living benefits in both indexed and variable annuities.
Beacon Research has pointed out that year-to-date income annuity sales reached $6.8 billion at the end of third quarter 2012. That was up 9 percent compared to the same year-to-date period last year, with the deferred income annuity version of the products being strong sellers in third quarter, Beacon says.
Was that bump-up in income annuity sales presaged by new income annuity debuts in 2011? According to the 2011 annuity debut list mentioned above, there were only five debuts of such products in the year. So at first blush, it appears the income annuity figures show no correlation between year-earlier debuts and current year sales.
However, the same list shows seven other types of income solutions associated with annuities and 19 more, when adding in products with new rider options for income and “income solutions” for employer plans and more.
So, overall, income product development was very strong last year (as was industry buzz about retirement income needs and issues). This pronounced rollout trend may have been a factor, then, in the increased sales of income annuities that Beacon’s report picked up for the first nine months of 2012.
A factor, not a cause
The key word for this discussion is “factor.” As in, a proliferation of product debuts may influence sales of that type of product in the following year.
However, it would be incorrect to say or imply that product debuts caused sales increases (or that fewer debuts in a product line caused sales declines). Sales upturns and downturns are influenced by so many factors, it would be impossible to say that any one factor is the reason for the trend.
The point here is to note that the volume of new product rollouts in the previous year may be a contributing factor to sales in the subsequent year.
So, while assessing the product frontier for 2013 and the options available to offer clients, annuity professionals might want to take a few moments so look back at the product lines that grabbed the product rollout lead in 2012. Then weave in any market and sales surveys and competitive intelligence reports that might be available as well as ear-to-the-ground information. The combination is what might help guide annuity planning and decision-making for 2013.
The product debut list used for this discussion is private, not a public resource. But advisors and marketers can easily develop their own lists, relevant to their own field of expertise, by looking back at the new products they saw come through their shops lasts year.
If nothing else, such a look-back will provide reminders of emerging product trends—and perhaps a glimpse into the “product thoughts” of the carriers with whom the professional deals.
Incidentally, the debut list for 2012 was built in the same fashion as the list in 2011. It shows that variable annuity products came in first place by year end, with 21 debuts (plus several more that focused on new types of variable annuity subaccount offerings). Indexed annuities came in second, with 19 debuts. And various forms of income annuities and income solutions came in third, with 16 debuts.
Linda Koco, MBA, is a contributing editor to AnnuityNews, specializing in life insurance, annuities and income planning. Linda can be reached at email@example.com.
© Entire contents copyright 2012 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.