More Agents Asking How Guarantees In VAs Are Backed
Changes in the market often affect the way financial services advisors do business by virtue of changing their clients priorities. Such a change has been noticed recently by Eric Henderson, an actuary and associate vice president, product manager, Nationwide Financial, Columbus, Ohio.
Now that the equities market run-up has been over for some time, agents are asking different questions of the providers of products to their firms, he says. Specifically, they want to know how the guarantees in variable annuities are backed.
This has become an issue for firms recently, largely because there are so many more guarantees in VAs now than there were five years ago, Henderson says. In fact, for many agents, the guarantees have become a way to make a VA sale, he adds.
“So, not only do you have the equity market thats changed a lot, but also the types of guarantees offered have changed a lot and the utilization of those guarantees has changed considerably over time, especially in the last couple of years,” Henderson says.
Simply offering a guarantee is not enough, he says. Knowing the product provider can stand behind the guarantee has become important for many agents.
Before, agents were asking, “Whats the next greatest product I can offer,” he says, but now they are more likely to ask how well the products they do offer are reinsured.
“Theyre thinking, My reputation is on the line as Im recommending these companies. I want to make sure that my firms due diligence area has really thought about this so that these companies are going to be around.”
A spokesperson with GE Financial, Richmond, Va., says good agents should always show a healthy interest in the ability of their product provider to stand by its obligations, regardless of market conditions. But, the interest should start with the insurance company, this spokesperson adds.
“We have received a number of inquiries of late from agents in response to the increased visibility of reinsurance and, as a result, we have made every effort to focus these agents on the bigger picture and assure our clients that our various life insurance entities are fully prepared to stand by all contractual obligations to customers,” the spokesperson says.
But, not every company that sells variable annuities is seeing an increase in questions by agents.
Ron Nelson, an actuary and director of product development and strategy in the annuity department at Northwestern Mutual Life, Milwaukee, Wis., says he has seen no change in the frequency of questions from the companys representatives on the guarantees in the variable annuities they sell.