There have been many articles written recently about fixed indexed annuities and their growth expectations for the upcoming year. After significant growth over the past few years, “FIAs remained strong in 2015 and will grow in 2016,” according to LifeHealthPro’s Peggy Bresnick. She interviewed the executive director of the Indexed Annuity Leadership Council (IALC), Jim Poolman, to discuss what happened with fixed indexed annuity products in 2015 and to forecast their 2016 outlook.
Although their sales have been growing, far too many people were unaware of indexed annuity products and their potential benefits as a retirement planning tool. There was solid growth in the industry last year and an increase in the overall consumer knowledge about fixed indexed annuities. Financially conservative Baby Boomers have been turning to the safety of indexed annuities for awhile. This is happening even more as this generation and others realize the importance of creating a guaranteed income stream. Guaranteed income riders are not only continuing to attract Baby Boomers, they are attracting the interest of younger generations as well. Millennials, in particular, have seen their parents and grandparents lose a significant amount of money in the markets during the Great Recession and they are looking for investments that are safe and secure. Generations X and Y and Millennials are showing interest in the principal protection and guaranteed income of indexed annuities.
The Department of Labor’s (DOL) pending fiduciary rule is the biggest challenge facing the indexed annuity industry in 2016. The final rule will likely be released sometime during the first three months of this year. It will affect the distribution of indexed annuities and could affect their competitive environment as well. Mr. Poolman thinks that the industry is more than ready for the ruling and will remain competitive despite any necessary changes to the selling process. The IALC has been following the government rule closely and communicating with the DOL so that the rule and necessary compliance procedures are clearly explained to the industry.
There is still a need to educate consumers and insurance agents about the importance and benefits of fixed indexed annuities in 2016. Many consumers still don’t know about indexed annuities and there are just so many competing products out there. Knowledge about the unique benefits offered by fixed indexed annuity products will garner more interest and likely increase overall sales again. It’s also important for agents to be well educated about FIAs so that they can properly educate consumers. This responsibility lies with insurance companies and industry trade groups like the IALC. This year, the IALC will release general facts about fixed indexed annuities. They also plan to better educate the media, government regulators and policy makers about indexed annuity benefits. Through the use of consumer surveys, the IALC plans to research on both the general attitudes about retirement planning and fixed indexed annuity products specifically. Sales of fixed indexed annuities are expected to continue on their upward path this year, thanks in part to increased education for consumers and agents alike.
Written by Rachel Summit