Will annuity sales continue their upward track in 2014? How will an uptick in interest rates impact insurers? What’s brewing on the regulatory front?
Recently, the Insured Retirement Institute (IRI) took a look back at 2013 and peered ahead to 2014. Here are four predictions the organization ventured for the coming year.
1. Annuity sales likely to increase
After enduring four years of slumping sales, 2013 was a turnaround year. Sales stabilized, led by fixed annuities. Through the third quarter, fixed annuities booked an 8 percent rise in sales, although variable annuity sales dropped 3 percent, according to statistics from Beacon Research and Morningstar, respectively. However, IRI points out, sales remain below the level seen prior to the 2008 financial crisis.
2. DIAs on track to reach $2 billion in sales
One of the new innovations IRI singles out is the development of deferred income annuities (DIAs). These products permit policyholders to access a stream of guaranteed income payments at some future date, typically five to 15 years from when the contract is issued.
3. Regulatory outlook: Fiduciary rule to be re-proposed
Of particular interest to financial advisors, the hotly debated revised fiduciary rule is expected to be re-proposed in August of next year by the Department of Labor. Other proposals circulating in Washington, D.C. are two proposed laws by Senators Tom Harkin (D-Iowa) and Orrin Hatch (R-Utah) to establish a national retirement act. Both are expected to get consideration in the coming year, IRI foresees.
4. A continued rise in interest rates good for industry, policyholders
After seemingly years at sea-depth levels, interest rates inched upward in 2013. That is good news for variable annuity carriers who may be able to reduce their hedging costs as well as their reserve requirements. Accordingly, that could mean a boost to variable annuity sales and a stabilization of fee structures.