Annuity buyers in a protection mode

As 2022 winds down, one thing is clear in the annuity world: protection is king.

LIMRA estimates that annuity sales might hit as high as $85 billion when the third-quarter numbers are finalized -- led by protection-focused products, said Todd Giesing, assistant vice president and head of annuity research, Secure Retirement Institute.

Giesing moderated a panel of industry executives today at the 2022 LIMRA Annual Conference. The session, titled "The Industry Shifts; Asset Protection Matters," largely focused on the shift to safer fixed-rate deferred, fixed indexed and registered indexed-linked annuities.

"We can see that sales in this category have exploded over the past few quarters," Giesing said of protection-focused products.

LIMRA is forecasting protection-focused products to lead annuity sales for the next several years as economic indicators point to a recession and low growth at best.

Income annuities should continue to increase as well, Giesing noted.

"As we look at the demographics in the United States, everything shows that we should be in favor for income," Giesing said. "We've had challenges here over the past three to five years with the economic conditions in this low interest rate environment. And things are improving and hopefully that'll help this segment as we move forward."

Keep it simple

The panel included Peter Landry, director, insurance and annuities for Wells Fargo; Jared Nepa, vice president and national sales manager for Lincoln Financial Group; and Joseph Powell, president of Barnabas Capital.

The key to matching customers with annuities is "simplicity," they agreed. And it starts with the initial conversations, Giesing said.

"If I went to you and said 'I'm going to give you a roll-up, a step-up, and we can annuitize down the road,' you're going to lose people within the first two or three minutes of discussing this with them," he said. "But if you said, 'Hey, I can solve your problem of having enough income in retirement or having that protection,' that I think is key."

Stiffening regulation is another reason to keep products simple. But it isn't happening as carriers are seemingly in "an arms race" with registered indexed-linked product features, Landry said.

He mentioned Regulation Best Interest, a Securities and Exchange Commission regulation that took effect in June 2020. Under the SEC regulation, brokers must make certain they are recommending products that are in the client’s best interest and not selecting a particular product because of the compensation or incentives attached to it.

"The concern I have is that as the market comes back 2024 and beyond are we positioning ourselves for an infinite amount of challenges by virtue of the complexity that's coming into the marketplace," Landry said.

Strong sales expected to continue

Total U.S. annuity sales increased 16% to $79.4 billion in the second quarter, according to LIMRA’s U.S. Individual Annuity Sales Survey. Fixed-rate deferred and registered index-linked sales reached an all-time record for the quarter, while fixed index annuity sales fell just short of a record quarter.

Giesing told the audience to expect more of the same when the third quarter numbers are released in the coming weeks. And beyond, as well.

"We do see protection-focused sales being the main driver of the individual annuity sales over the next five years," he said. "We're obviously going to have a significant bump here in 2022 with products like fixed rate for fixed indexed annuities likely having record years and we do expect this to continue as we move forward. But this doesn't mean there's not going to be opportunities in other segments of the market."

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

© Entire contents copyright 2022 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.