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2015’s Annuity Trends: Income Annuities and VAs w/out GLBs

LIMRA Secure Retirement Institute recently performed a lot of research in preparation for the annual Retirement Industry Conference that they co-sponsor.  They found two significant trends in the individual annuity industry.  This information comes from Linda Koco’s Insurance News Net’s article, “Today’s Rising Annuity Stars: Non GLBs, Income Annuities.”  In just three years, the number of variable annuities sold with GLBs went down 28%.  In the same time frame from 2011-2014, the number of variable annuities sold without GLBs increased 66%.  This could be for two reasons; either the GLB was not offered with these products or the option was not chosen.  On the income annuity front, sales increased from $10.5 billion to $12.4 billion from 2013 to 2014.  This includes both fixed immediate and deferred income annuities.

When it comes to the Guaranteed Living Benefits (GLBs) trend, LIMRA SRI’s assistant vice president says that increasing sales of variable annuities without GLBs is something to watch going forward.  It’s still a smaller market than variable annuities sold with GLBs, but the shift is noticeable.  Non-GLB sales went up to $41 billion in 2014 from $25 billion in 2011.  Many companies stopped offering GLBs after the financial crisis of 2008, but annuity professionals expected them to fall right back into place after the markets stabilized again.  Companies decided to continue offering these non-GLB variable annuities, partly because they help their books.  Many insurers are still offering GLB options along with other choices for consumers to consider as well.  These include death benefits, long term care riders and alternative funds.  With these other options becoming increasing popular with consumers, insurance companies will continue to innovate variable annuities without GLB riders.

The other big trend that LIMRA SRI says to watch out for is the rapid increase in income annuity sales.  They anticipate total income annuity sales to be more than $20 billion by 2018.  Career agents and broker dealers dominate income annuity sales now, but sales could be even higher than $20 billion in the next few years if insurance companies break into the bank and independent channels with their income annuities.  Insurers have to work with these groups to help them introduce income annuities into their consumers’ retirement plans.  Bank customers are typically more conservative so they need to understand how they can get a higher guaranteed payout in exchange for giving up control of some of their assets.  In the independent channel, customers have to be educated on how an income annuity can fit as part of a retirement plan.  Once income is guaranteed with one of these annuity products, other money can be invested elsewhere for the potential of higher returns.

We’ll be watching these annuity trends along with the rest of the industry over the next several months.  It looks like variable annuities without GLBs will have continued success.  Income annuities, including fixed immediate and deferred income annuities, will likely continue their increasing sales in the market.

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