Life-Only, Cash Refunds See Gains in 1Q

Agents and financial advisors have shown more interest in life-only and cash refund guarantee options available with income annuities in the first quarter compared with this time a year-ago, new data show.

The increase in the life-only guarantee option could be a sign that advisors are relying more on allocation and planning tools when presenting annuity options to clients. That's according to Gary Baker, president of CANNEX USA, a pricing and analysis service supporting the annuity market.

When using an allocation process, the advisor can still address estate planning and death benefit needs with other assets in the portfolio while investing a portion into the most efficient income option to build an income floor, Baker said.

Firms and advisories have been implementing new processes to support advisors in anticipation of the Department of Labor’s fiduciary rule. The rule’s original applicability date of April 10 has been pushed back to June 9.

Life-only quotation volume increased to 23 percent of all quotations in the first quarter compared with 19.8 percent of all quotations in the year-ago period, the CANNEX Survey Experience report found.

Life-only quotation volume percentage has hovered around 20 percent since 2014 until this year, Baker said.

Advisor quotations for the cash refund option also rose to 39 percent of all quotations in the first quarter, the report found. That was an increase from 38 percent in the year-ago period and 32 percent in the first quarter of 2015.

Although annuitants do not receive a beneficiary guarantee with a life-only annuity, these products generally produce the highest lifetime payout compared with any other lifetime income option in the market.

The life-only option, also known as zero period certain, generally means the annuitant’s estate gets nothing back if the annuitant dies after he or she receives the first payment.

CANNEX data reflects what retail products and features are being quoted through the CANNEX pricing service by advisors associated with banks, broker-dealers and independent marketing organizations.

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].