Filed Under:Annuities, Sales Strategies

Expert: Fixed annuity caps heading up in 2013

Image: Sira Anamwong /

Image: Sira Anamwong /

Fixed annuity expert Jack Marrion predicts caps on fixed annuities will rise next year, but the velocity of the increase will be measured and one that carriers can handle.

Marrion, president of Advantage Compendium, a St. Louis-based research and consulting firm, made his predictions during a webinar last Thursday sponsored by the National Association of Fixed Annuities (NAFA). Marrion also serves as NAFA’s director of research.

During “The End of the Beginning: 2013 and Beyond,” he said that insurers may have cut too deeply and will make adjustments in the new year. He added that Treasury rates have been “unduly low” for so long a period that they, too, will head upward in 2013.

He said that bond yields “bottomed out” in early December and bond yields will also rise, which means bond prices will fall.

Whether carriers will raise the caps on existing policies is a decision that the individual carrier will have to make, he said.

Marrion noted that lower commissions have enabled carriers to raise caps as well. He further predicted that new product twists and riders will broaden the market for fixed annuities and make them more appealing to consumers who in numerous surveys have expressed positive views of annuities.

However, reaching and educating those consumers remain a challenge for the industry, Marrion said. If rates on CDs rise, advisors must show potential buyers that a 3 percent cap on a fixed annuity is still a good investment option.

Prospective buyers are out there, Marrion said, pointing to a surge in the older population. “There have never been more prime candidates for fixed annuities than today,” he said.

In the near term, Marrion predicted sales of fixed annuities will decline in the fourth quarter. However, in 2013, he said he was “optimistic” sales will increase.

The webinar ended with a summary of legislative issues facing the fixed annuity industry detailed by NAFA’s president and CEO, Kim O’Brien. She reiterated the organization’s opposition to the imposition of the fiduciary standard on insurance and investment sales, saying the current suitability standard is a strong consumer protection. She noted that although Mary Schapiro has announced her intention to step down from the SEC, her replacement, Elisse B. Walter, is a staunch supporter of the fiduciary standard. SEC plans to move forward with the fiduciary standard in the coming year.

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