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Income Riders Give Fixed Annuity Sales a Boost

Last year, fixed annuity products enjoyed a sales boom to the tune of $117.4 billion, and industry experts and analysts are crediting a slew of new income riders for the boost. With the impending new fiduciary rule from the Department of Labor, many agents have grown leary of pushing annuity products. However, new income riders have added an attractive spin, according to a recent InsuranceNewsNet article.

“What they (insurers) want to do is to help all those agents in the independent channel who were selling FIAs to help them sell fixed annuities,” said Jeremy Alexander, CEO of Beacon Research, a consulting firm that tracks annuity sales.

Insurers are hoping to make fixed annuities appear more like indexed annuities, according to market analysts. Sheryl J. Moore, president and CEO of Moor Market Intelligence and Wink, believes that income riders will help “the transition for those salespeople that will no longer be doing any indexed annuity business because of the BIC exemption.

Under the DOL’s Prohibited Transaction Exemption 84-24, selling fixed annuities is less onerous for agents than selling under the Best Interest Contract Exemption. The arduous BICE is required to sell fixed indexed annuities (FIA) using retirement money.

According to Wink, several annuity companies have launched income riders on traditional fixed annuities, just this year. These companies include American Equity Investment Life Holding, Life Insurance Company of the Southwest, Midland National Life Insurance Company and North American Company for Life and Health. These new riders are “designed for independent insurance agents looking to sell under prohibited transaction 84-24 of the DOL fiduciary rule,” stated Ron Grensteiner, president of American Equity Investment Life Insurance. “Due to the competitive guaranteed income, we think they will be accepted by a broader group of agents.”

While the implementation of the fiduciary rule has been delayed by the current administration (from April 10 to June 9), insurers are still moving forward with their income rider innovations. American Equity is expected to release a new version of its lifetime income benefit rider in the new quarter. The company was the runner-up in sales of FIAs in the U.S. last year with $5.7 billion in sales. They are also planning to add optional market-value adjustment features allowing FIA policyholders to receive higher rates, Grensteiner added.

“We have resisted having MVAs in the past on our fixed indexed annuities, but have found ourselves to be outliers by not having them,” he said.

For the first time in a long time, sales of variable annuities dropped below 50% in annuity market share last year, while fixed annuity sales skyrocketed. The favor for fixed annuities comes from the regulatory changes and higher interest rates. Industry experts predict the U.S. annuity market will reach $220 billion this year, with money flowing between variable and fixed annuity products.

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