One only needs to peek at InsuranceNewsNet' most-read annuity stories of 2020 to see what a crazy year it has been.
There's been good news, bad news, regulation and legislation. Annuities sold great, sold poorly and, for a brief period, didn't sell at all as insurers pulled products from the shelves during the raging COVID-19 pandemic.
If five stories ever painted a full picture of a year in annuities, these articles might do it:
Annuity Sales Hit 11-Year High In 2019: LIMRA
Early 2020 gave little indication of what lie ahead and big sales were celebrated.
Annuity sales of $241.7 billion in 2019 represented the best sales in 11 years as the industry continued to rebound from regulation and other pressures.
Sales increased 3% over 2018 results, according to the Secure Retirement Institute Fourth Quarter U.S. Annuity Sales Survey. But fourth-quarter 2019 sales gave at least some cause for pause as sales dipped to $57.6 billion, down 8% compared with fourth quarter 2018.
Security Benefit’s Index A ‘Fraudulent Scheme,’ Lawsuit Says
This January story touched on a simmering issue within the industry: proprietary indexes.
The class-action lawsuit alleged that Security Benefit Life Insurance Co. defrauded consumers by implementing a “fraudulent scheme” involving a proprietary index used in two fixed indexed annuities.
The allegations were similar to other lawsuits: plaintiffs claimed Security Benefit manipulated clients to invest most of their fixed indexed annuity account values in the company's synthetic index, which performed far worse than portrayed.
The lawsuit targeted two of Security Benefit’s FIAs, the Total Value and Secure Income annuities, both of which were offered with proprietary indices that the company advertised as "capable of producing double-digit returns," the lawsuit alleged.
SECURE To Ignite ‘Huge Boom’ In Annuities, But Not Immediately
Another January story, this one celebrated the SECURE Act, passed into law at the end of 2019.
The Setting Every Community Up for Retirement Act was called the most significant pension reform in a decade, but one that required education. The law not only makes it comfortable for sponsors to fortify 401(k)s with annuities but also adds favorable portability rules to make it easier to roll them out to other retirement plans or IRAs.
“For those that work with or start working with 401(k) plans, there could be a huge boom in annuity sales starting, likely in 2021,” said Jamie Hopkins, director of retirement research for Carson Wealth.
“The reason you won’t likely see a huge boost in 2020 is because plans still have to add annuities and do a review in order to get them into the plan as an investment option,” said Hopkins, also an associate professor of taxation at The American College of Financial Services and director of the New York Life Center for Retirement Income.
Large-scale annuity inclusion in plans would not immediately follow enactment of the expanded safe harbor for a related reason — there are three constituencies that needed to be educated, explained Sri Reddy, Principal Financial Group’s senior vice president in retirement and income solutions.
First, advisors needed to learn about SECURE’s nuances and how to be experts in this arena, Reddy said.
Second, recordkeepers needed to learn about how annuities are different from mutual funds with age restrictions and contribution differences, and they also needed to build technology to support annuity offerings and their proliferation.
The third group that needed to be educated, he said, were the plan sponsors.
NAIC Committee Passes Best Interest Annuity Rules
This story from New Year's Day set the stage for 2020 in rulemaking as the National Association of Insurance Commissioners made a key end-of-year vote on an important model law.
The Life Insurance and Annuities (A) Committee voted 11-1 to pass the annuity sales standard on to the NAIC Executive Committee and Plenary. The executive committee made the final vote to pass the annuity rule changes in February 2020.
The model articulates a best-interest standard through the following four obligations: care, disclosure, conflict of interest and documentation.
Companies Pull Annuities, Drop Rates
This March story gave the first hints of the COVID-19 economic impact on the annuity business, as annuity companies scrambled to reduce rates and pull products from the market.
Carriers initially held back while the equity and bond markets roiled in volatility. Although the stock markets dropped persistently, bond prices fluctuated wildly, especially after the Federal Reserve cut its funds rate to near 0%.
In the first two weeks of March, thirty-three companies reduced rates 113 times, said Sheryl Moore, Wink CEO.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.
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