Annuities: Unlocking the tech advantage — With SILAC’s Dan Acker

When Dan Acker met Conseco founder and current SILAC CEO Steve Hilbert in 2016, it led to a relationship that eventually brought Acker to SILAC and an opportunity to help build an annuity juggernaut.

Today, riding high on the crest of annuity growth, Acker sees technology as key to building on the company’s current success. 

“The average age for someone who’s buying one of our annuity products is 69 years old,” explains Acker. “And that’s probably consistent across the industry. But in my mind, there’s no reason more people in their 40s shouldn’t buy our products. They may not have $100,000 or more to put into an annuity, but there’s no reason they can’t start smaller and have a safer component within their portfolio.”

Technology is also key to working with independent agents, he says. “At SILAC, we’re trying to put ourselves in the shoes of a producer at that point of sale. How can we make it easier?”

In this interview with InsuranceNewsNet Publisher Paul Feldman, Acker describes his journey into the top echelons of the industry and how he and SILAC are working to “change the industry for the better in our own way.”   

Paul Feldman: How did you get into the industry?

Dan Acker: I was going to school at the University of Utah to finish my bachelor’s degree, and in 1998 I needed a job to pay for school. There was a company that was advertising at the University of Utah named Educators Mutual. I joined the company in August 1998 as a billing clerk. I worked there up until 2005. And when I left in 2005, I was assistant vice president of finance — I had been given an opportunity to be controller that I probably didn’t deserve. But I had a great boss who gave me that opportunity, and that’s what really set the stage for my future career in the insurance industry. So it was not by design that I got into the industry, it was out of necessity. The industry has been tremendous to me professionally and personally. And I think it’s undervalued, underestimated. It seems like a boring industry, and it’s not that.

Feldman: Tell me about SILAC. You were involved in the early days of the company, correct?

Acker: Yes. Prior to joining SILAC, I worked for a company called Sentinel Security Life. When I joined Sentinel in 2005, it had 12 employees, and it was selling final expense coverage. I was hired to try to figure out a way to grow the company because they were losing more policyholders than they were gaining every year. 

I already had the finance side, the statutory accounting side, down from working at Educators Mutual in the finance accounting area. Since Sentinel was such a small company, I had the opportunity to work in all other areas of insurance and have hands-on experience developing new products: Medicare supplement, hospital indemnity and, most importantly, annuities. 

When I left in 2018 to join SILAC, Sentinel had gone from 12 employees to close to 300. I met the CEO of SILAC — our current CEO, Steve Hilbert — in 2016, just by chance at an industry event. Steve had previously founded Conseco, one of the largest insurance companies in the country. In 2017, he acquired a company called Equitable in Salt Lake City that was just down the street from Sentinel’s headquarters. After he acquired Equitable — which is now SILAC — in 2017, he’d come to Salt Lake City and we’d get together every once in a while. Fast-forward to 2018, I called Steve and said, “Look, if you’re ever looking for somebody or there’s an opportunity, I’d love to join your team.” I joined SILAC in June 2018. For me it was a chance to learn from one of the greatest CEOs our industry has ever seen, and it was also an opportunity. 

At the time, Equitable was not in the annuity space; it was in long-term care, Medicare supplement, traditional senior market products. My directive was to eventually close down all those product lines and get SILAC into the annuity space. For me, it was an opportunity to be part of building a second annuity carrier — Sentinel being my first, SILAC being the second.  

It was a unique opportunity: one, working with Steve Hilbert; two, getting to help another carrier in the annuity space. SILAC/Equitable has a long history, with more than 87 years in business. I would say we’re still in our startup phase. Our goal is to change the industry for the better in our own way. That’s what we’ve been doing since 2018.

Feldman: How are you trying to change the industry for the better?

Acker: Early on, I had the opportunity to hire some great people who I’ve known for a long time and worked with, one being Carrie Freeberg, senior vice president of product and marketing at SILAC. She heads up our product development department and works with our marketing team with me. 

But, looking at products, I think one of the challenges facing our industry is complexity of the annuities and getting the story out there. There are a lot of misperceptions. Our products are complex by design, just given their nature. So we don’t need to make them any more complex. Our goal from the start was to make these products as simple as possible and easier for the producer to understand and sell, and easier for the consumer to understand. 

One of the positive things about SILAC coming into the industry is to get back to the basics of what a fixed indexed annuity does and that safe accumulation — lifetime income with principal production. No loss of principal. Sometimes a loss of principal comes in the form of fees. That’s another thing we have been able to do with SILAC, which is roll out some very competitive fixed indexed annuities. But we do not charge the consumer any fees. Let’s say we have a year where the S&P is down and we know with an FIA, the consumer is not going to lose any principal. But then the advisor has to sit down with that consumer and say, well, good news, you didn’t lose any principal, but you actually did lose 1% to 2% in the form of fees. That doesn’t leave a good taste in anybody’s mouth. 

Another way we’re trying to make things better is through education, and not only for advisors. I just finished a call with a young advisor who does business with SILAC and who is very good at teaching agents how to sell annuities, or how to sell a different type of annuity. Early in my career, I used to think the big carriers were providing that type of education, but I’ve come to learn, nobody is teaching agents how to sell and keep it simple. As an industry, I think we can do a lot more to talk positively about our products and what they do, because there’s no other product in the market like an FIA that offers some upside, some growth, lifetime income and zero downside risk.

Feldman: There are so many advantages to owning an annuity. What can the industry do to better educate the public about annuities?

Acker: There are a lot of positive things going on. For example, the Alliance for Lifetime Income, which carriers have partnered on. I think initiatives where the industry comes together and works to promote our products — not a particular carrier’s product — are positive. We need to take our carrier hats off, set our egos aside, and work together collectively to educate our country about these products and what they do. 

Feldman: Indexed annuities are coming off four consecutive years of record growth. Our markets are changing. We have a new administration. Where do you see the market going over the next two years?

Acker: Our industry has seen tremendous growth, but I don’t know how much of that growth is truly organic and new growth. Given the interest rate changes, there’s a lot of replacement going on in our industry, which is great because it’s allowing consumers to move into products with the much higher current rates. However, there’s also a downside, because that means folks are leaving contracts early, which is not always a good thing from a carrier perspective.

I would love to see more organic growth, see the number of first-time annuity buyers grow. I think if that was up 300%, that would be tremendously positive for our industry. As the replacement business begins to die down, there are fewer opportunities to move consumers to higher rates. I think overall we’ll probably see sales come down slightly within the next year, but I don’t view that as necessarily negative if we can continue to focus on first-time annuity buyers and increase that number. 

Feldman: As an industry, we must do better at communicating the benefits of annuities. I think we would have more organic growth, and I do think that’s a problem in the industry.

Acker: There has been a lot of news obviously since 2016 and even before that with the Department of Labor and various rulings. But I think one thing that has come out of the various conversations and the potential regulation from the Department of Labor is that it has raised awareness of our product. Producers who hold more than an insurance license are beginning to understand the importance of our products and what they do. That’s a positive for the industry. SILAC operates in the independent agent channel, which is made up of insurance producers but also those who hold various securities licenses. The more traditional financial advisors, if you will, who are marketing our products, the better it is for our industry. Again, it’s just another avenue of raising awareness of what fixed indexed annuities and other annuities can do for a consumer.

And annuities shouldn’t be the only thing in a consumer’s portfolio, but there definitely is a place in every consumer’s portfolio, in my mind, for a fixed indexed annuity or other annuity. As an industry — at least at SILAC, traditionally — we haven’t marketed to that younger generation, but that’s something that we plan to change. And we’re trying to come up with some annuity products specifically tailored for a younger generation, allowing more flexibility with what kind of premium, how often it comes in and the amount of the premium.

Feldman: What are some of the features that would be great to offer to somebody to get that buying age down?

Acker: I think technology is the key. Annuities are not bought, they’re sold. Advisors and producers play a very important role in educating the consumer on our products and what they do. These products are complex. I don’t really see a direct-to-consumer model. I know there are carriers out there doing it, and I think with certain annuities, it might make sense, but for a younger generation, I think there is an opportunity to use technology.

If you think about how many people in this country today don’t have a traditional job. They’re driving for Lyft, they’re driving for Uber, so they don’t have a 401(k), they don’t have traditional retirement. If we could come up with a way where the minimum amount was zero, essentially, they can contribute $20 a week through an online platform. I think that’ll go a long way in attracting a younger generation. I think an annuity could be a step in the right direction for them if we can make it flexible enough and cost-effective for the carrier. And I think technology is where we can do that.

Feldman: How do you see multiyear guaranteed annuities performing in the upcoming year? Now might be the best time to get them.

Acker: There are two things happening in the MYGA space. As you know, with MYGAs — I’ll call them a commodity — the highest rate typically wins. There aren’t a lot of bells and whistles with a MYGA, and that’s the beauty of them. 

I think there are two things at play with MYGA rates. They’re at very attractive levels. They have been for the last couple of years, primarily because of how fast yields have risen, which is allowing a carrier to pass on higher rates. But I think given the replacement business that’s happening, some carriers have a lot of business going out the door; it’s moving to other carriers. And so the MYGA is a way to generate positive cash flow. As long as we can compete with CD rates, the other advantages of a MYGA, such as the tax-deferred status, should make it an easy decision for consumers.

Feldman: What are the biggest challenges SILAC is facing to compete in this annuity space?

Acker: The annuity space is as competitive as I’ve ever seen it. And not only with some carriers that have been in this space for a long time. There are a lot of new entrants every year or every month, it seems. And we’ve been able to compete. We started in 2018; our sales were all MYGA in the second half of the year when we started. And our sales in 2018 were just over $150 million. The following year in 2019, we went to $1.7 billion in sales, and we’ve grown ever since. By design, though, a couple of years ago, we became less competitive just to slightly slow sales as we were raising capital, with the goal of improving our ratios and ultimately improving our rating from AM Best.

Even though we’re a new entrant and a small carrier, we’ve been able to compete very successfully and became a top 10 annuity carrier relatively quickly. I think today we’re in the top 15 based on sales, even though that’s not what we focus on. For us, it’s about focusing on the right level of sales based on our capital. Our biggest challenge right now, though, to answer your question specifically, is ratings. And specifically, AM Best. Rating agencies right now are a challenge, and that’s something we’re working through. Given some changes they’ve made over the last couple of years, it’s made it challenging for a company like SILAC, which does rely on reinsurance. We have very strong reinsurance partners, but based on the changes AM Best has made, it’s impacted our rating. And there’s a role AM Best plays in this industry.

They have a view, but it’s one view. There’s a lot to look at when evaluating an insurance company. AM Best is one tool but should not be the only tool. There are five or six other large rating agencies that have different views, and it’s not our job to tell a rating agency their view is wrong. We accept their view. But what we’re trying to do is obtain more ratings from companies like Fitch Ratings, from KBRA, which are nationally recognized and have very stringent processes that they go through, like AM Best, but they have other views. And so I think it’s important that producers weigh all of the ratings that a carrier has; speak directly with the carrier, with their management team; and become comfortable with their financials and what their business model is.

That’s something we try to do at SILAC: give our producers access to the CEO on down. It’s important that producers are comfortable with our model, who we are as people and what our outlook is. 

We’re not going to presume to try to change their rating process, because that doesn’t feel appropriate. But in no way should a rating agency undermine an insurance department. We’re already put through very stringent financial tests, examinations, etc. 

Feldman: How do you see technology affecting distribution?

Acker: Positively. SILAC is a new entrant, if you will, with a long history. But as a new entrant, I’d say we’re behind the eight ball. There’s a lot we can do with technology, and we’re trying to catch up quickly. As an industry, we’re traditionally not known to be a technology leader.  

But I think there’s a tremendous opportunity in direct-to-consumer. I think there may be a path there for certain products, but that’s going to be a challenge. I think using technology to partner with our producers through the education process, to educate consumers on our products, is where we’re focusing at SILAC. We’ve had electronic apps out there for awhile that make the sales process more efficient, easier. At SILAC, about 70% of every annuity sold is on an electronic platform through Hexure, who we’ve partnered with, and their FireLight eApp.

Besides focusing on products, at SILAC we’re trying to put ourselves in the shoes of a producer at that point of sale. How can we make it easier? For the producers, teach them how to sell our products, teach them how to allocate across various indices. There are more than 100 custom indices in our industry that carriers work with outside of the S&P. And I think that’s a challenge. How do I pick among 100 different indices that are available?  We’re coming up with ways to help the producer at the point of sale.

Feldman: SILAC also has an AI index, correct?

Acker: We do. We launched that index about three years ago, roughly, and it’s been a very successful index for us. And there are ideas in the works to expand on that AI index.

Feldman: How has AI impacted SILAC?

Acker: We have a team that is responsible for developing the AI initiatives within SILAC. We’ve been spending the last year testing different ways AI can help us, primarily through our customer service team and internally. And so now we’re rolling that out to all 325 associates. We must streamline as much as we can, whether by extracting emails, reading through emails to just get to the point of the email and save time. AI will be used in a bigger way going forward for SILAC, mostly internally for our associates. As this initiative progresses, I think it’ll then shift to how we can help the producer partner with that point-of sale-process. 

Paul Feldman started the website InsuranceNewsNet in 1999, followed by InsuranceNewsNet Magazine in 2008. Paul was a third-generation insurance agent before venturing into the media business. Paul won the 2012 Integrated Marketing Award (IMA) for Lead Gen Initiative for his Truth about Agent Recruiting video and was the runner-up for IMA's Marketer of the Year, a competition that includes consumer and B2B publishing companies. Find out more about Paul at www.paulfeldman.com.