Ohio National has launched a new twist on the fixed indexed annuity (FIA) guaranteed living withdrawal benefit (GLWB) rider: a roll up that keeps on rolling.
Unlike many GLWBs where income doesn’t necessarily increase once contract holders agree to begin withdrawals, Ohio National’s ONdex Income Accelerator GLWB is guaranteed to increase by a least 3 percent a year.
The crux of the rider is that the interest credited is an amount multiplied by three, or an amount to which is added 3 percent of the contract value, whichever is greater.
The provision applies only in the first 20 index years of the contract, when no withdrawals are taken. During a year in which the contract value earns, say, 2.5 percent, the rider value would receive a credit of 7.5 percent.
In a year when the contract value generates 0 percent interest, the rider value would automatically rise by 3 percent.
Thanks to the rider, the ONdex FIA’s benefit base rises by 3 percent, even in the income phase of the annuity, said Ian Laverty, vice president of annuity product management at Ohio National.
Tackling Longevity and Inflation
“We’re addressing longevity and inflation,” Laverty said. “There’s a lot of value in how this fits,” into a retirement income plan.
In a good year, the rider could generate a credit as high as 10 percent, which the company called a big improvement over many competitor products that offer a fixed credit to the rider.
“This is serving a need for a particular group for income,” said Gary E. Phifer III, assistant vice president of sales and marketing at Ohio National.
Depending on age at issue, the rider comes with an annual charge of between 0.75 percent and 1.15 percent of the rider’s value, the company said.
Policy holders will be charged $30 if the contract value drops below $50,000.
A 50 basis point rise in interest rates in the past seven months bolstered the company’s ability to offer a more generous crediting rate in the rider than might otherwise have been the case, executives said.
Insurers have been adding income riders to annuities for years, but recently shifted away from annuities with guaranteed living benefits.
The Ohio National rider is a “natural progression” of the company's expansion into the FIA market, which the company entered last year with the launch of ONdex Annuity and ONdex Freedom.
Joining the FIA market gives Ohio National the opportunity to grow, but also diversifies the company’s annuity market risk exposures, said Michael J. DeWeirdt, senior vice president, of annuities strategic business.
FIA competitors include Nationwide, Symetra and Great American.
Ohio National, which has traditionally sold variable annuities, is distributing ONdex through wirehouses, independent broker-dealers and banks, Laverty said.
Last year FIAs were one of the fastest growth segments among fixed annuities.
Sales rose 10 percent to a record $58 billion in 2016 over 2015, according to industry tracker Wink’s Market & Sales Report.
In the first quarter, however, FIA sales dropped 14 percent to $12.9 billion compared with the year-ago period, Wink’s reported.
Impending Department of Labor fiduciary rules have hurt FIA sales as agents and distributors opt for a wait-and-see approach.
The rules are scheduled to take effect Friday, with full implementation Jan. 1, 2018.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected]