Nonbuyers Like Annuities, So Why Aren’t They Buying?

CHICAGO -- Sales of deferred annuities may have dropped from 2011 to 2017 but that doesn’t mean consumers don’t like annuities and the guaranteed lifetime income they provide.

A sneak peak of LIMRA’s upcoming Annuity Buyer/Nonbuyer Survey reveals that many consumers who are not buying annuities for retirement income remain open to buying them in the future – it’s just that they believe it’s not the right time to buy or that annuity products aren’t right for their particular situation.

The survey results will be presented in a breakout session at today’s 2018 Retirement Industry Conference.

In looking at declining sales figures over the 2011-2017 period, LIMRA researchers asked whether something had changed among consumers. “Are the buyers changing? Are we seeing a shift in demand or are the people who are buying annuities this year different from the people who bought annuities last year or the year before that?” asked Todd Giesing, director of annuity research with LIMRA Secure Retirement Institute.

Annuity buyers haven’t changed much over the years, Giesing said. They tend to be around the same age and have about the same level of retirement saving. But one difference stood out between the annuity buyers and the nonbuyers.

“When we look at the buyers, significantly more of them had a written retirement plan than the nonbuyers had,” he said. “Our research has shown throughout the years that these formal plans and being prepared for retirement and working with an advisor to bring that value does help consumers  understand their needs better and help lead them to the right solutions, such as annuity products, if needed, in retirement.”

Those who buy annuities gave researchers their top two reasons for purchasing the products: to supplement Social Security and pension income in retirement, and to receive guaranteed income payments for life.

When it comes to making the annuity buying decision, an advisor can make all the difference, LIMRA research indicated. Consumers who bought annuities rated their experience with an advisor as being above their expectations in helping them to make their decision. Only about half of the nonbuyers reported having a favorable advisor experience.

“So the advisor definitely has a significant impact in regard to the buying process in providing those solutions because individuals truly don’t understand what the value proposition of annuities is,” Giesing said.

In examining why consumers don’t buy annuities for retirement income, Giesing said the research showed that only about 20 percent of nonbuyers said they don’t like annuities and would not consider purchasing them. For the remaining 80 percent, buying an annuity is a matter of the right product at the right time.

“Eighty percent of nonbuyers said it’s a good product but not the right product for their situation right now,” he said. “So I think there’s a lot of opportunity in the interactions between a nonbuyer and an advisor if it makes sense for their situation to look at annuities as part of their retirement strategy.”

The nonbuyers gave two other reasons why they aren’t buying annuities: the desire to maintain liquidity and control over their principal, and the need for more information about annuities.

The industry has much work to do if they are going to convert those nonbuyers, Giesing said.

“It will take more than products to get us there,” he said. “We have to make sure the training is there to educate consumers as well as advisors. We have to move from products to solutions and integrate that into holistic retirement plans as we help people get to their intended goals in retirement.”

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at Susan.Rupe@innfeedback.com. Follow her on Twitter @INNsusan.

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