Over the next three years, retail life and annuity agents and financial advisors can expect simpler annuity structures, more fee-based annuities and fewer riders and income guarantees in product rollouts, a consultant said Wednesday.
The days when annuities giants pumped out an “overwhelming volume of complex, tough-to-understand annuity products are gone,” said Chris Eberly, vice president of research and consulting with Novarica, an insurance IT consultancy.
Insurers instead have focused on “a few key blocks of business and simplifying products within those blocks.”
These days, insurers are guided by low interest rates, new regulation and targeting retail clients based on income needs rather than what companies can sell.
“It’s the end of the shotgun approach” to sales, Eberly said.
The latest intelligence comes after several weeks of interviews with IT departments responsible for product development within insurers.
Eberly’s research appears in an “Emerging Trends in Annuities” report published this month with his colleague senior associate Harry Huberty.
It details new developments that include the introduction of fee-based annuities, bringing products to market faster, more transparency in how agents are paid and improving efficiencies around the administration of annuities.
Changes will affect products in the industry’s variable and fixed annuity segments, both of which saw declines in the first quarter.
First-quarter variable annuity sales dropped 8 percent to $24.4 billion from the year-ago period while fixed annuity sales dropped 15 percent to $27.6 billion over the same period, according to market tracker LIMRA Secure Retirement Institute.
Distributors to Narrow Focus
Agents should also expect insurers to favor some distributors over others as companies decide which channels suit them best, Eberly said.
By and large, insurers are prioritizing based on what has traditionally been their “strongest (distribution) suit,” he said.
Some insurers have “doubled-down” on their career channel – Northwestern Mutual, Mass Mutual Financial and New York Life – for example, he added.
Other insurers seem intent on bank and broker-dealer channels. Still other insurers are expanding their relationships with registered investment advisors (RIA).
Insurers are attracted to RIAs because they are growing rapidly and are more profitable and capturing more assets faster than other channels.
Index Protector 7, a fixed indexed annuity launched from scratch last year by Great American Insurance Group in Cincinnati, has found 50 RIA distributors so far.
With the continuing growth in retirement savings, insurers cultivating the independent channel are doing so because they don’t have a large captive distribution network, or because they know their captive agents are not getting any younger and looking to retire, Eberly said.
“I’ve not come across a carrier saying we’re dumping our captive and going RIA, but I have come across carriers saying we have a captive but we want to grow our RIA,” he said.
Insurers have realized that RIAs are the ones capturing the assets “so they are saying let’s use that as a market channel for us,” he said.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected]