Securian and InsLyft launch innovative Hindsight Indexed Account

The development of customized or proprietary indexes by financial investment companies has been trending in recent years as more firms find traditional benchmarks like the S&P 500 or the Dow Jones average, expensive, outdated, archaic, and overcomplicated.

One of the latest to join the trend is InsLyft, a top financial distribution and product innovator, which along with Securian Financial, announced the launch of the Hindsight Indexed Account, saying the methodology would bring “clarity and effectiveness” to index product design.

“We believe Hindsight has the potential to become the new industry standard, replacing outdated models that limit clients to a single index,” said InsLyft president Allie Miller.

The Hindsight Indexed Account was made available beginning last month on the new Eclipse Accumulator II Indexed Universal Life product from Securian Financial.

Miller explained that along with simplifying the benchmark process, a customized index can be better tailored to align with a firm’s specific investment philosophy, thematic focus, or risk appetite.

“I’ve seen all these complex strategies that carriers were coming out with and all these [low volume] strategies that nobody understands,” he said. “Most of the agents don’t understand the products being sold today.”

Shift away from traditional indices

The shift away from traditional indices is happening as investing becomes more technology-driven and data-focused, and as firms believe they need proprietary indexes to better reflect their unique views, investment styles, and target client segments.

Many firms want to move away from using broad, standardized benchmarks that may not accurately reflect their fund’s exposure. A custom index can better match the investment mandate, making performance evaluation more relevant.

Developing a proprietary index allows firms to differentiate their offerings in a competitive market. They can serve as marketing tools, highlighting the firm’s unique approach to portfolio construction or thematic investing.

Moreover, says Miller, the old benchmarks are simply passe.

About 99% of the carriers only use the S&P as their benchmark,” he said. “So, if you did that, you would have come in second 90% of the time over the last 25 years because the NASDAQ's been the number one performing index.”

Some of the companies turning to customized indexes include BlackRock and State Street Global Advisors, which introduced a proprietary ESG and climate-focused indexes for their sustainable investing products. Goldman Sachs created custom indexes to support its factor-based investing and thematic products. JP Morgan Asset Management uses custom indexes for structured products and annuities, especially those tied to volatility-managed strategies.
InsLyft’s Hindsight index is not exactly new, said Miller. Its basics were developed about 15 years ago by Anthony Ginsberg, of GinsGlobal Index Funds, a pioneer in index-linked investment products.

“He worked with Zurich, AIG, American General, and others utilizing the design, but it hasn’t been used in years,” he said.”

Three reference indices utilized

The Hindsight Indexed Account offers policyholders greater diversification by including three reference indices, the S&P 500, NASDAQ 100, and Russell 2000.

“The Hindsight methodology means clients and financial professionals won’t need to guess at allocations for premiums,” said Ginsberg “The unique crediting method weights the highest performing index at 60%, the second highest at 40% and the third at 0%.” This retrospective way of allocating and pricing is a much more simple and direct method for both agents and clients.

“The sixty-forty-zero means that whatever index comes in first you're gonna get 60% of the gains, whatever one comes in the second you're gonna get 40% of the gains, and whatever comes in third you're gonna get zero all up to the cap of the carrier,” Miller said. “So the reason why it works so well is when you apply a cap and utilize this design, and why it's good for the agent and why it's good for the client, it hits the cap about 30% more frequently than a standard annual point-to-point option, and it avoids hitting zero about 35% more frequently.”

Miller said that automatic rebalancing is a key to the Hindsight index.

“You don't have to rebalance it at the end of the year because it's already going to do that for you,” he said. “So, from the suitability and compliance perspective, it’s great. When you get that call from your advisor asking you how you want to rebalance, you have no idea. So this is another worry off the table.”

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