Indexing the industry for IULs and annuities

Clients have shared a singular, nagging fear over the last few years: They are terrified of doing everything "right" and still running out of money.

A volatile post-pandemic economy, rising interest rates and a historic surge in consumer demand for protected growth have pushed our industry to consecutive sales records. This momentum shifts our focus toward product innovation, tax efficiency and the critical need to solve the longevity crisis.

Professional indexing in today’s market involves much more than tracking the S&P 500. It requires a deep understanding of the convergence among accumulation, protection and new regulatory guardrails. These elements are fundamentally changing the value proposition of indexed universal life and fixed indexed annuities.

Why IUL market share is skyrocketing in 2026

I remember when IUL was considered a niche alternative. Now, IULs command 25% of all new life insurance premiums in the U.S. These market-linked designs, when combined with variable universal life, have new premiums surging 35%, up from 30% five years ago.

Annuity momentum appears even more pronounced. Total U.S. annuity sales eclipsed $120 billion in the third quarter of 2025 alone. Traditional FIAs remain a staple, yet the rise of registered index-linked annuities signals a significant shift. RILAs hit a record $20.7 billion in Q3 2025, proving that consumers are increasingly comfortable with "buffered" risk in exchange for higher upside potential.

This growth is a direct response to the middle market gap. As many Gen Xers who feel trapped between the volatility of the stock market and the stagnant yields of traditional savings, I position IULs as a middle ground. IULs provide the 0% floor necessary for peace of mind, paired with the upside potential required to outpace inflation. This makes IULs appealing to many clients.

Maximizing gains with index locks and proprietary indices

Carriers have responded to the "higher for longer" interest rate environment with a wave of index lock features. This innovation allows a policyholder to lock in gains midsegment if the index hits a peak. Such a maneuver protects growth from a late-quarter market slide, a conversation I find myself having more frequently with cautious retirees.

Proprietary, volatility-controlled indices now drive the industry. Carriers such as Allianz, Nationwide and Athene use artificial intelligence-driven algorithms to maintain participation rates—often above 100%—even when traditional S&P 500 caps remain under pressure. Don’t fear the complexity of these indices; instead, start leveraging them to deliver the stability your clients want.

Leveraging the 2026 LTC penalty-free distribution rule

Perhaps the most significant breaking news for 2026 is the evolution of the long-term care landscape. We are witnessing the death of the "use-it-or-lose-it" era. Clients are exhausted by the uncertainty of standalone LTC premiums and are instead gravitating toward hybrid IULs and annuities with 7702B or 101(g) riders.

Section 2534 of the SECURE 2.0 Act introduces a game-changing provision that took effect on Jan. 1. Consumers may withdraw money from qualified retirement plans—such as 401(k)s, 403(b)s or individual retirement accounts—penalty-free to pay for LTC insurance premiums.

• The opportunity: Individuals under age 59½ can withdraw up to $2,600 per year (indexed for inflation) without the standard 10% early-withdrawal penalty.
• The strategy: Advisors can now position IULs and annuities as self-funding vehicles. A 52-year-old client can repurpose existing qualified assets to fund a hybrid policy. This provides a death benefit if they remain healthy and a massive LTC pool if they do not.

Navigating state LTC mandates and payroll taxes

While many in the industry viewed AG-49B and its subsequent iterations as a hurdle, the long-term outlook suggests these regulations are, in fact, a professionalization tool. Tightened illustration requirements ensure that volatility-controlled indices don't "out-illustrate" the S&P 500. This alignment serves the consumer's best interests.

In 2026, the conversation is shifting from "hypothetical 9% return" to "look at this 0% floor." The Department of Labor and state regulators continue to emphasize "regulation best interest," emphasizing the importance of transparency of indexed products.

Closing the 102-million-person underinsured gap

The industry currently operates in the Peak 65 era, with record numbers of Americans reaching retirement age daily. The real opportunity, however, lies in the need gap. Recent research indicates that while half of U.S. adults own life insurance, 42% (roughly 102 million people) admit they are underinsured. Gen X and older millennials account for the bulk of this gap, recognizing that Social Security and modest 401(k) balances will not offset health care inflation. This demographic remains the prime target for IULs that emphasize living benefits.

Modern insurance is not only about what happens when a client dies; it is about what happens if they live. Chronic illness riders and tax-free supplemental income provide some security for a life that rarely goes according to plan.

The future of the indexed professional

AI-driven underwriting now allows some IULs and FIAs to be issued in hours rather than weeks. Despite this speed, the human advisor remains the essential guide for clients. We translate 7702B riders into the reality of a spouse staying in their home and turn participation rates into the certainty of a college fund.

Indexing your practice for 2026 means staying ahead of tax shifts and product innovations. My goal is to ensure every client feels their plan is as dynamic as the market itself. Our industry sells more than insurance; we provide the peace of mind that serves as our actual currency.

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Louis Slagle is the senior vice president of strategic growth and business integration at TruChoice Financial, an AmeriLife company. Contact him at [email protected].