AI’s ‘thoughts’ on the future of indexed products

By John Forcucci

Indexed universal life and indexed annuities have always been innovating and advancing, morphing with markets, regulation and technology. If we fast-forward 10 years, the next wave of change likely won’t be about a single “hot” index or a new cap. It will be about rewiring how these products are built, priced, explained and used in real financial plans. Since artificial intelligence is the “hot thing” in the insurance industry — and most other industries — we asked ChatGPT to tell us what the future of indexes might look like 10 years hence.

What ChatGPT thinks indexed life and annuities could look like in 2035

1) From “pick an index” to personalized risk budgets — Today’s crediting choices feel like a menu; by 2035 they’ll feel like a thermostat. Carriers will offer dynamic, rules-based allocation engines that keep each client within a personalized volatility “budget.” Instead of manually toggling between volatility-control indexes and fixed accounts, policy owners will elect goals — income stability, cash value growth, protection priority — and the engine will shift allocations automatically at preset intervals. Think target-date logic adapted to indexed crediting, with transparent guardrails and auditable rules to satisfy regulators.

2) Smarter, more honest illustrations — Expect illustrations to become less about “if everything goes right” and more about “how this behaves across many markets.” Carriers will standardize multi-scenario views: low/median/high paths, sequence-of-returns stress tests and fee-drag overlays that follow the policy’s actual mechanics. Agents will be able to toggle shocks (e.g., a three-year drawdown, rate spikes) and instantly see income rider effects, loans and policy charges. The net result: fewer surprises, better persistency and sales built on behavior, not hope.

3) Hedging 2.0 brings new crediting designs — Capital markets innovation will leak into retail designs. Alongside classic point-to-point caps and participation rates, you’ll see “soft floor” and corridor crediting that offer modest downside tolerance in exchange for meaningfully higher participation — bridging the gap between fixed indexed annuities and registered index linked annuities without converting to securities products. More frequent resets (quarterly, even monthly) will reduce sequence risk for income riders. Expect transparent hedging disclosures — what instruments are used, collateral practices and counterparty concentration — to become table stakes.

4) Income that adapts to life, not just markets — Tomorrow’s income benefits won’t ratchet only when markets cooperate; they’ll adapt to household realities. Inflation-aware income riders will tie step-ups to consumer price index baskets or regional cost indexes with defined caps. Longevity-boost features will share mortality credits more explicitly for those who defer or accept guardrails on withdrawals. And hybridization will deepen with an indexed chassis with embedded chronic illness, caregiving or home-care benefits that can accelerate value without nuking the income base.

5) Continuous underwriting and behavior-linked charges — Accelerated underwriting won round one; round two is continuous. With consent, carriers will price some IUL charges along a band that can drift modestly over time based on objective signals — medication adherence, verified activity and preventive care milestones — documented through privacy-centric data pipes. The swing will be controlled (nobody wants whiplash) but enough to reward healthier behavior and reduce anti-selection. For agents, that means service models that encourage clients to earn those better charges.

6) Real planning: loans, collateral and tax coordination done right — Policy loans will get safer and smarter. Expect auto-collateralization features that throttle loan availability when crediting conditions weaken, plus in-force alerts when loan-to-value thresholds approach danger zones. Tax-aware drawdown tools will coordinate IUL loans with qualified and brokerage distributions to manage brackets, income-related monthly adjustment amount surcharges, and capital-gains timing. For annuities, systematic withdrawal “guardrails” will become configurable, allowing households to raise or lower income bands as markets and spending change — without triggering complex rider resets.

7) Compliance as a feature, not a speed bump — By 2035, the best sales platforms will make compliance invisible. Suitability/best-interest frameworks will be hard-wired into e-apps and proposal tools, mapping client facts to product features, documenting alternatives considered and capturing a plain-English rationale. For agents, this means less paperwork, more confidence and fewer retroactive headaches when markets wobble or regulators update guidance.

8) Mass-affluent and gig-economy distribution — Indexed products will finally get friendlier at smaller ticket sizes. Expect streamlined IUL designs with lower minimums, simplified riders and payroll or platform integrations that allow fractional premiums from gig-income flows. On the annuity side, micro-annuitization will let households lock future income “slices” during good earning years and pause during lean ones — no clunky surrender charge surprises.

9) Transparent value and pressure on costs — As digital comparisons mature, policy charges and rider fees will face constant sunlight. Carriers that unbundle, disclose and defend pricing with credible outcomes data will win. Look for “fair value” dashboards that benchmark caps, pars and rider costs against peers for similar durations and option budgets. Simpler, cleaner, fewer-fee stock-keeping units will rise; baroque bells and whistles will fade.

John Forcucci
Editor-in-chief