The question on the minds of a lot of variable annuity professionalsin the field as well as the home office–is what to do about VAs?
That is, how should marketers position the product for the new post-recession, post-tax law change, post-stock market rout environment?
The answer has a lot to do with marketing the guarantees that many VAs offer, suggests John Fenton, a principal with the Tillinghast-Towers Perrin consulting firm in Atlanta.
It also has to do with positioning the VA as a product “uniquely qualified for income planning, as compared to certificates of deposit and mutual funds,” he says.
The VAs protection features and ability to pay the client a guaranteed retirement income should help combat any negative fallout that might arise from the recent tax legislation, says a new update report on the VA market recently released by Tillinghast.
According to the study, gross VA sales came to $30.5 billion for the first quarter of 2003, a 12% increase over the same period last year. Sales were $32.8 billion in the second quarter of 2003, up 10% over the second quarter of 2002 and up 8% over the first quarter of 2003.
So, “VA sales are chugging along just fine right now,” says Fenton. But, he adds, the greatest growth came from a handful of companies, while half of the VA companies surveyed actually had sales decreases.
Certain product features drove sales at the companies seeing the increases in 2003, says Fenton. These features include the guaranteed minimum income benefit (GMIB), the introduction of the guaranteed minimum withdrawal benefit (GMWB), the guaranteed death benefit, and the fixed account option (particularly in C-share VAs, which have no front-end sales loads or back-end surrender charges).