Beneath the Lull, Annuity Activity Aplenty

Overall sales of individual annuities were flat in the first quarter, but don’t let the lull fool you.

Behind the staid numbers, annuity companies are experimenting with product tweaks as they push to distribute through new channels in search of growth, which is likely to come from reaching down to the mass affluent and middle market.

The annuity industry is “trying to find out where the market is,” said Chris Eberly, Novarica vice president and co-author of a recent report on the trends in the life and annuity sector.

First-quarter overall annuity sales were $52 billion, flat with the year-ago period, according to LIMRA Secure Retirement Institute.

Sales fell last year compared to 2016, but forecasts call for rising sales this year as regulatory burdens lift and interest rates move upward.

Product Changes Stress Flexibility

On the product side, the operative word is “flexibility” as companies respond to consumer demand to make products younger buyers want to buy, Eberly said.

So how are insurers pressing forward?

In the deferred income annuity world, insurers have:

• Introduced shorter minimum income deferral periods.
• Lowered initial premium payments and offered flexible contribution levels to make such annuities more attractive to younger consumers.
• Injected more death benefit options and add more flexibility in the timing of payouts.

In the VA world, insurers have:

• Offered access to more alternative asset classes in which advisors can invest.
• Developed a host of new fee-based products to attract registered investment advisors.
• Issued indexed-linked annuities with some protection against loss in exchange for the potential for higher credited gains.
• Linked riders to annuities to help the chronically ill  accelerate or raise immediate payouts.

“The common theme of these is expanding the potential annuity owner and distribution channel bases,” Eberly and Kay write.

Distribution Moves to Version 2.0

On the distribution front, annuity companies are moving further into online, bank and broker-dealer channels, Eberly and colleague Steven Kaye, Novarica associate vice president of research, write in their new report.

Progressive insurers want to improve the agent browsing, workflow and buying experience over online channels to boost agent self-service functions that might have required email or a call center help desk in the past.

Here’s what agents can expect:

• Upgrades to their online portals which agents use to manage customers, boost productivity, hunt for sales and marketing support, conduct needs analysis and explore suitability. Big improvements have been implemented at Ohio National, CUNA Mutual, Lincoln, Great American, Mass Mutual and Bankers Life.
• More communication around texting and social media in a bid to appeal to younger advisors and buyers.
• Better educational materials to support the understanding of fee-only products as fee-only advisors, who have traditionally stayed away from annuities, enter the market and think about suitability issues down the road.
• New annuities available through the direct-to-consumer channel. Nassau Re’s multiyear guaranteed annuity is available online and Prudential this year launched its a digital-only GIFT annuity, a voluntary deferred income annuity.
• Linking the idea of an annuity with income and a personal pension, which Blueprint Income through its insurance company partners says can be funded with small monthly contributions.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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