ZIP Code Analysis Of Annuity Markets Reveals Surprises, Opportunities

By Linda Koco
AnnuityNews

A common question that big data scientist Bill Poll is getting these days is, “Where should I move my annuity practice?”

The questions are coming from annuity professionals who have reached certain event-based decision points about their practices, said Poll, who is a managing partner and co-founder of Information Asset Partners (IAP), Metuchen, N.J.

The professionals are looking for quantitative insights to help them make those decisions. The firm responds by crunching vast amounts of consumer information — big data — that helps identify current annuity markets based on the buying behavior of people who have bought annuities in the past two years.

Many companies use analytics services on a recurring basis. But annuity professionals just now are incorporating analytics into their businesses, and so are putting a toe in the water first — by using analytics on an as-needed basis.

 “The callers are often at a juncture in their business,” Poll told AnnuityNews. Many of them “want to move to a location that has a lot of people who are potential annuity buyers - or they want to target neighborhoods where they can do specialized promotions.”

The unexpected city

Some advisors might be tempted to target the nation’s largest cities, without ever using a data analytics service. That’s due to the huge population base in big cities.

They would have a point. According to IAP’s annuity opportunity data, New York City ranked in first place on IAP’s top 10 list of annuity buying cities in 2014.

Los Angeles and Chicago came in second and third, followed by Houston, San Diego, Philadelphia, Phoenix, Dallas and Washington.

But if advisors were to limit their annuity marketing only to big cities, they might miss opportunities in unexpected areas. For instance, IAP’s 2014 analysis found that Austin, Texas, is a “great market” for annuities, Poll said. The state capital is the 10^th largest market in the IAP 2014 city rankings for annuities.

This was unexpected, he said, because the city has a “smallish” profile when compared to the other top 10 cities. But, based on the data, Austin has a lot of people with buying behaviors just like other annuity buyers in the last two years, he said, noting that the data includes buyers of both variable and fixed annuities.

The metropolitan area for Austin is ripe for annuity sales too, he added, noting that the Austin metro market has been growing at four times the level of the U.S. average annuity market. Austin metro even “trumps the larger San Antonio metro market for annuities,” he said.

That is even though, based on total households, Austin metro is 12 percent smaller than San Antonio metro.

“Good” annuity markets also exist in smaller cities numbering 20,000 to 30,000 households, he added. For instance, in the Northeast, Bensalem, Pa., is the top annuity market for towns of this size.

Other top markets in this size category are: Aiken, S.C., in the Southeast; Algonquin, Ill., in the Midwest; and Aliso Viejo, Calif., in the West. 

Who wants this information?

Annuity practitioners who are looking to relocate or expand in nearby areas are showing interest in this information, Poll said. “They are looking for areas with annuity sales potential.” Some are using the data to help decide good locations for hosting annuity seminars too — for instance, in ZIP codes where likely prospects reside.

Annuity professionals who do Internet marketing also are interested, he said.

That may seem contrary to the commonly-held notion that online firms are selling to the whole world. But Poll said some of these firms want to direct their online advertising only to areas in locations where there are likely buyers.

Some have said they are looking to reach ZIP codes that are reachable by car. If an optimal market is a four-hour drive away, Poll said, a practitioner might decide to launch an Internet advertising campaign to that market and then drive there to follow up on leads in person. 

If a ZIP code or city turns out to have a relatively low percentage of potential buyers, though, the practitioner may decide to look elsewhere for opportunities.

Challenges common notions

A common assumption is that the best markets for individual annuity sales can be found in retirement destinations like Florida and Arizona. However, the IAP’s findings are a little different.

The 2014 study of top 10 ZIP codes for annuities in the U.S. found that eight of those top 10 were located in major metropolitan areas such as Queens, Brooklyn and Atlanta. While people certainly retire in those areas, the locations are not especially associated with being “retirement destinations.”

The top 10 ZIP codes for annuities did have two “retirement destinations,” however. Both are in in central Florida: ZIP codes 32162 in The Villages and 33547 in Lithia. The former is the top-ranked ZIP code for annuity markets in the country, and the latter ranks in 10th place.

But Poll noted that ZIP codes in in other parts of the U.S. come close to the top 10 ZIP codes.

One example is Pearland, Texas — ZIP code 77584. This is a suburb south of Houston and not widely perceived as a “retirement destination,” he said. Yet Pearland is the second-ranked ZIP code for annuities in the country, and “6.6 percent of its households are in the current annuity market, which is equal to three times the U.S. average.”

Annuity advisors have opportunities across the country, Poll concluded. “In fact, 60 percent of the highest potential ZIP codes are not in the top 10 states.”

In all, there are more than 2.7 million households that have characteristics similar to households that recently bought annuities, and 4 million to 5 million individuals in those households are prospective buyers, he said.

AnnuityNews Editor-at-Large Linda Koco, MBA, specializes in life insurance, annuities and income planning. Linda can be reached at [email protected].

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Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at [email protected].