Insurers Move to Boost Sales With New Products/Payouts

Payouts rose Monday by 10 basis points for some riders sold with new variable annuity contracts, Nationwide Life & Annuity Co. Inc. announced.

The increase, which equals one-tenth of 1 percent, applies to contracts with lifetime income riders and lifetime income capture living benefits. The news comes in the wake of a quarter-point hike in a key lending rate announced by the Federal Reserve.

The changes are just the latest moves by a major insurer as the industry seeks to counter the rate hike and boost sales. Nationwide had previously raised the payout percentages on both living benefits riders by 15 basis points in August.

“It is no secret that the variable annuity industry is in a state of flux, and some carriers are changing their business models entirely,” said Eric Henderson, senior vice president of life insurance and annuities at Nationwide, in a news release.

Lifetime income riders, which cost extra, offer annuity holders payouts for as long as they live, even if the account values drop to zero.

After the 2008 financial crisis, when interest rates declined quickly, many insurance companies reduced variable annuity sales as a way to limit the generous payouts they had promised before market collapse in 2008.

Living benefits within variable annuities are beginning to rebound, said John McCarthy, senior product manager with Morningstar Inc. However, 2015 variable annuity sales are expected to dip by about 6 to 7 percent compared to 2014.

“We are in I would say a bit of an uncertain market than we have been in the past and if (interest) rates bump up, we could see a big shift in rising sales,” he said during a webinar last month.

As more baby boomers retire and life expectancies rise, some advisors say living benefits riders offer a hedge against the risks of clients living too long.

“They are a key component of our strong, stable and diversified product portfolio,” said Henderson of Nationwide, based in Columbus, Ohio.

“We know the value that lifetime income riders provide to investors, so we are enhancing our variable annuity products to help meet the needs of today’s clients,” Henderson said.

Two New Life Insurance Products

In a separate announcement, Massachusetts Mutual Life Insurance Co. is introducing two new universal life insurance policies, a fixed and a variable policy, available only to employees making a minimum of $100,000 in annual salary.

The two policies are only available through the workplace, or the worksite, and each policy offers a death benefit ranging from $50,000 to $3 million per employee, the company said in a news release.

Higher coverage amounts are possible along with flexible premium options. Policies are available through an employer-paid, employee-paid or shared-payment structure, and riders are also available, the company said.

Employers like to offer life insurance at the worksite because it helps them retain executive talent, particularly in an environment with a falling unemployment rate.

“We want to make it easy for employers to provide their valued employees life insurance products to enhance their financial security,” said William Silvanic, senior vice president of MassMutual Worksite Insurance, in a news release.

For the life insurance industry, selling life insurance policies through employers represents a valuable sales channel at a time of stagnant life insurance sales, made even more difficult with low interest rates.

Individual life insurance new annualized premium rose only 2 percent in 2014 over the previous year, according to LIMRA’s Retail Individual Life Insurance Survey

Voluntary/worksite sales for 2014 were estimated at $6.89 billion, an increase of 3.7 percent from 2013, according to the latest figures from Eastbridge Consulting Inc.’s annual U.S. Voluntary/Worksite Sales Report published in April.

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].