Banks, B/Ds To Overtake Independent Agents In FIA Sales

Banks and insurance broker/dealers will overtake the independent agent channel in selling fixed indexed annuities “likely someday.” That's according to the CEO of American Equity Life, a top FIA seller.

FIAs, which have recorded torrid sales recently, are sold mostly through independent agents. However, with Department of Labor regulators raising investment advice standards, FIAs will be more difficult for agents to sell.

That has left an opening for banks and broker/dealers to take market share away from the independent agents. This idea was reiterated recently by American Equity’s president and CEO John Matovina.

Over the long term, banks and broker/dealers offer “a far greater opportunity than what we have with independent agents,” he said.

The independent agent channel is “a little more mature in terms of market” than banks and broker/dealers, Matovina said. In the independent agent channel, there’s “not necessarily a clear identification of where that distribution will be replenished from,” he added.

Matovina, along with several other American Equity executives, spoke at the Des Moines Insurance Conference last month.

American Equity, with about 540,000 policyholders, was the No. 2 seller of FIAs last year with nearly $7 billion in sales, according to Wink’s Sales & Market Report.

More than $52 billion worth of FIAs were sold last year, Wink’s also reported.

FIA Product Changes More Attractive to Banks

Matovina said that the insurer’s anchor relationship with an independent marketing organization might generate between $100 million and $150 million annually from a thousand agents reporting into that field organization.

But getting to that $100 million to $150 million level through a bank or broker/dealer could be done with a lot fewer agents, he estimated.

American Equity executives said that banks and broker/dealers were becoming more accepting of FIAs in light of changes to the product structures – such as shorter surrender periods, the disappearance of premium bonuses and simpler choices.

Banks and broker/dealers, which are heavily regulated, were given a boost earlier this year when DOL regulators authorized them as “financial institutions” to sign off on fiduciary transactions involving retirement accounts.

Independent marketing organization, however, which recruit independent agents and help insurers distribute life and annuity products, are not authorized to act as a financial institution. This raises the liability exposure to individual agents.

American Equity executives are expected to reveal more about their approach to the fiduciary rule in an earnings call with analysts next month. At that time, the company is expected to announce another strong quarter of FIA sales.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].