Carriers Must Be Proactive In Defending Annuities, Deloitte Says

Insurance companies need to own and control the image of annuities. A good way to do this is by being proactive in driving the messaging themselves, maintained an executive from Deloitte Center for Financial Services.

By a “far margin,” people depend on intermediaries like planners and agents to walk them though understanding and buying annuities, said Sam Friedman during a webcast hosted by Deloitte. He is insurance research leader in Deloitte’s New York office.

But that “doesn’t mean insurers should delegate this role and responsibility entirely to their distribution forces,” he said.

Instead, individual companies can make efforts to reach out to the public directly with education about the purpose and value of annuities, Friedman maintained. They can do this in a way that helps the field force by creating “warm leads,” he said.

Some of that outreach should include defending annuities against critics of the products, he said.

Action steps

The webcast included ideas for how annuity carriers can accelerate annuity market growth in several areas. These were based on findings of a new Deloitte study on annuity consumers. However, Friedman’s comments in the area of outreach have import for producers too, especially the call to defend annuities against critics. This is a topic of special concern when the criticisms misinform and confuse clients.

The annuity is a more difficult product to understand than some other financial products, Friedman said, and the public has a general lack of awareness about the products as well.

“We think the industry can do a better job of mitigating that, and by doing so, set the stage for an expansion of annuity sales,” he said.

As it is now, “too many times, annuities are being defined by a lot of outside parties who are not always portraying annuities in a positive light,” Friedman said.

To address this, the industry needs to attempt to “own and control” its own messaging about annuities by appealing directly to consumers, he said. This will help drive traffic to intermediaries the carriers use as well as to their own shops, he predicted.

Suggestions

Friedman suggested several ways to make direct outreach work to strengthen annuity industry growth, including the following:

Support a spokesperson. This could be done via a joint effort with other annuity industry groups, according to the Deloitte study. The spokesperson would be a single, high-profile individual who promotes and explains annuities to the pub­lic “on behalf of the industry,” Friedman said. Significantly for those concerned about the negative reports on annuities, this spokesperson also would defend the products against criticism.

Refute negative press about annuities. “We’d love to see a balancing viewpoint (from the industry) but with emphasis on the value of annuities,” Friedman said.

Bolster websites with more annuity education. Many people go online to learn about annuities before they enter the sales process, he said, so provide online education that will drive more traffic to the website. This way, “you are controlling the message as opposed to the consumer sites and publications that are not as positive about annuities as you would like them to be.”

Tweak annuity advertising to be more effective. Today’s annuity advertising generally has “very little knowledge impact among annuity buyers,” Friedman said. “Only 2 percent of the buyers said they were prompted by an ad to buy an annuity.” Deloitte suggests carriers use more explicit multi-media campaigns and direct outreach efforts that explain the potential uses for and value of annuities.

Launch educational initiatives and digital “direct-connect” campaigns. These should be designed to raise public awareness, with the focus on the purpose and value of annuities.

Create comparison scenarios that show the benefits of annuities over other alternatives. It’s important to “put out there that an annuity is a unique product and it has a very definite purpose for people,” Friedman emphasized.

He nudged the industry not to remain “passive” about creating an atmosphere and brand awareness about annuity products. Instead, he said, “step up to defend more quickly” any question about the value of annuities or how they are sold or who sells them.

Channel conflict?

In the full report, Deloitte gives recognition to the possibility that some producers may be uncomfortable with carriers making direct appeals to consumers. However, the report also indicates that this also could go the other way.

“To avoid potential channel conflict,” it says, “any direct outreach efforts could conclude with the suggestion, ‘Ask your financial advisor if an annuity is right for you,’ along with a service to connect interested prospects with an affili­ated intermediary.’”

“A carrier could also offer the option to speak with one of its in-house customer service representatives if a prospect prefers that option.”

InsuranceNewsNet Washington Bureau Chief Arthur D. Postal has covered regulatory and legislative issues for more than 30 years. He can be reached at [email protected].

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Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at [email protected].