Filed Under:Annuities, Fixed Indexed

Top five developments to watch for in the annuity space

For several years following the global financial crisis, annuity market dynamics remained relatively static, consisting of a fairly stable set of companies leading in product sales year over year, a relatively quiet merger and acquisition (M&A) scene, and most product development action aimed at de-risking and reducing product risk profiles.

In the last 12 to 18 months, however, significant catalysts for change have come forth, shaking up the market. New entrants have emerged and have taken market share, product rotations have commenced, sales leaderboards have been reshuffled and a spate of M&A activity has taken place.

private equity impact1. Private equity firm impact. 

Private equity firms have made a significant splash in the annuity market over the last few years with a slew of major annuity block acquisitions.

block management2. In-force block management.

Several annuity writers, variable annuity writers in particular, have developed over time large legacy in-force annuity blocks whose inherent risks warrant very careful management going forward.

tech3. Technology evolution expands beyond operations.

A large number of insurance providers have gone through, or are in the process of going through, actuarial and finance transformations focused on updating existing technology and process infrastructure to optimize internal operations. 

As the use of digital technology and social media continues to expand, we expect carriers also to transform the advice and fulfillment models that support the delivery of annuity-based savings solutions to the market. 
 
These outlets provide a cost-effective approach to reaching consumers that has the potential to engage the next generation of retirement income buyers in a more effective way than traditional approaches.
 
Annuity providers that remain confined to traditional distribution and fulfillment models run the risk of a rising cost base and a less engaged set of consumers as time goes on.

 

Next Week: The top producers of the life insurance industry will be gathering in Las Vegas on August 13-15 for networking, education and more! Click here to sign up!​

product rotation4. Continued product rotation away from variable annuities. 
There are a number of factors that suggest a continued rotation of premium dollars away from variable annuities and into fixed annuity products. 
 
Variable annuity market leaders continue to face capacity constraints and reduce the richness of product feature to control sales levels as a result; at the same time, the number of remaining active providers continues to shrink. 
 
Fixed indexed annuities continue to set sales records and are offering a compelling alternative to variable annuities for retirement income via lifetime withdrawal benefit riders.
 
With interest rates rising, the book value fixed annuity market could begin to reverse its sales slump as credited rates become more competitive. 
 
While variable annuity products are not going away any time soon, these developments seem to be turning the heads of providers by offering alternative avenues to growth.
 

Next Week: The top producers of the life insurance industry will be gathering in Las Vegas on August 13-15 for networking, education and more! Click here to sign up!​

 

deferred income5. Deferred income annuities. 

With sales now reaching the US$2 billion mark and several providers having recently brought new products to market, deferred income annuities are igniting a new-found spark in the previously stagnant immediate annuity market.
 
These products are offering consumers another savings-vehicle alternative for retirement income needs, with more flexibility than traditional single-premium immediate annuities and more simplicity than competing fixed indexed and variable designs.
 
Providers have also addressed initial product concerns by including liquidity options that provide payoffs in the event of death and inflation-protection options.
 
Given the success of fixed indexed annuities, the potential for rising interest rates and the swelling tide of a widening retiree pool, deferred income annuities should continue to build on their early market success.
 

Next Week: The top producers of the life insurance industry will be gathering in Las Vegas on August 13-15 for networking, education and more! Click here to sign up!​

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Nichole Morford

Nichole Morford
Managing Editor

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