Goldman Sachs survey finds RILA acceptance, rise ‘meteoric’

By Doug Bailey

Reacting to expanding investor demands, annuity sellers are emphasizing value propositions that strike a balance between managing downside risk while offering opportunities for upside participation. Buffered annuities, such as Registered Index Linked Annuities (RILAs), have seen acceptance that is “rather meteoric,” according to Marci Green, head of Retirement Intermediary and Insurance Distribution at Goldman Sachs.

That finding is clearly highlighted in the fourth annual Goldman Sachs Asset Management Annuity Industry Survey 2024, "Driving Retirement Outcomes, which reveals a number of industry trends and insights that are changing the retirement planning landscape.

Most notable is the growing popularity or demand for so-called buffer annuities, or defined outcome investment funds. According to the survey, 45% of respondents indicated that these products are a top priority for the next 12 months. Buffered annuities, including RILAs, are designed to protect investors from market downturns while still offering the potential for growth. This blend of protection and opportunity addresses the dual desires of many investors: to grow their wealth while effectively managing risk.

‘Still room’ for RILA innovation

“The acceptance adoption has been rather meteoric and we're still continuing to see product development focused on RILA despite the fact that it's been around for the last couple of years,” said Green. “We see 70% of respondents continuing to focus on RILA while many of them already have focused on the product. I would have expected that interest would have come down a little but instead it seems to be there’s still room for more innovation with RILA.”

Green said overall the data show how U.S. annuity providers are focusing on long-term goals and solutions, and balancing macroeconomic risks, to help drive retirement outcomes for underlying investors.

Perhaps most significantly in the survey was the indication that 71% of firms already offer these solutions, underscoring their growing popularity in retirement planning. In-plan annuities provide a reliable stream of income during retirement, addressing the concern of outliving one's savings. This focus aligns with the broader goal of ensuring financial security for retirees.

In-plan annuity offerings increase

“We see 71% of the respondents suggesting that they're already in the market with an in-plan annuity, and then an additional 18% suggesting that they're considering it but haven't yet launched the in-plan annuity,” Green said. “So clearly, there's a massive focus in the industry on the importance of in-plan income.”

The survey respondents, Goldman said, represent a broad range of organizational roles including executive leadership, relationship management, investment selection and oversight, product development and management, sales and distribution, and marketing. The responses came from 150 industry participants, a 10% increase over last year, aggregated across 34 insurance companies.

The survey also found that artificial intelligence is making waves in the annuity industry, with 50% of survey respondents reporting using AI to increase sales efficiency. AI's ability to analyze vast amounts of data and provide insights is proving invaluable in tailoring products to meet client needs and improving operational processes, Goldman said.

AI for investment strategies grabs foothold

Moreover, 11% of respondents currently offer AI-driven investment strategies on their annuity platforms, and another 25% are considering implementing such strategies. These AI-driven approaches are unlocking new business possibilities and reshaping how investment strategies are developed and managed.

“We were looking to see whether or not there is an interest in offering any kind of investment strategies that may have some embedded AI factors or components contributing to the process,” said Green. “And what we found that while adoption was relatively low, roughly 11 percent suggested they do already offer AI-driven investment strategies. A much more significant percent, just north of a quarter or 27 percent, said they do not currently offer some sort of big data or AI-driven strategy, but they are currently considering implementing them. So, you know, we're starting to see a little bit more interest there.”

The survey also highlights the macroeconomic challenges that insurers are contending with. The top concerns include credit and equity market volatility (58%), a potential US economic slowdown or recession (57%), and issues related to U.S. politics, tax reform, and inflation (39% each). These risks are influencing product decisions, pushing insurers to develop solutions that can withstand economic uncertainties while providing growth potential.

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].