Fixed Indexed Annuities Will Survive, Experts Say

WASHINGTON, D.C. -- Nationwide stands ready to adapt its annuity products to whatever the market demands in the post-DOL fiduciary rule world, said Mike Morrone.

"We will go where the distributor want us to go from a product design perspective. I think some distributors will want it simple and we will have some products that solve that," said Morrone, associate vice president, fixed annuity product strategy, Nationwide Financial Group.

He was part of a panel discussing innovation of fixed and fixed indexed annuity products at the Insured Retirement Institute's Government, Legal and Regulator Conference 2016. Much of the session focused on the Department of Labor rule and its impact on these products.

Industry-wide annuity sales posted strong numbers in 2015, due largely to record growth in sales of FIAs. Fixed annuity sales were up 8 percent overall, with FIAs experiencing a 14 percent increase in 2015 as the FIA segment continued to build on the 24 percent sales growth in 2014.

These sales increases have occurred in a challenging interest rate environment, both for yields and supporting lifetime income guarantee liabilities.

Two things will help the industry survive the new regulations, the panel agree: thorough training and simpler products. Nationwide is on board, Morrone said.

"We require the investment bank to be able to talk about their indexing strategy," he said. "We make sure you understand you are buying a fixed indexed annuity. We say 3 to 5 percent is what you can expect with zero downside."

As for compensation, disparate commissions for similar products, as well as commissions at the high and low range, are likely to change, said Kevin W. Mechtley, consultant with First Consulting & Administration. But a uniform pay scale across product lines isn't likely, he added.

"We're all going to have an implementation period," Mechtley said, "And then when the first lawsuit comes down, we're going to have another implementation period."

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com.

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