Finally

Finally, finally, finally.

Yes, finally, a top executive in the business has stood up and said “Enough already!” about the bad buzz that variable annuities continue to get in some mainstream publications.

It was a bracing moment at the 16th Annual Conference for Life Insurance sponsored by PricewaterhouseCoopers in New York earlier this month when Kip Condron, chairman and CEO of AXA Equitable, said, “It is time for us to stand up and be counted and say that variable annuities are designed for retirement.”

He continued, “The misunderstandings about VAs are wrong. We need to let people know the industry can provide guaranteed confidence in the ability to retire well.”

When I spoke to Kip after his session, he reiterated that he just couldn’t stand it anymore. When I said it sounded like that howl from Paddy Chayefsky’s “Network”–”I’m mad as hell and I’m not going to take it anymore”–we laughed, but he said that was exactly the way he felt.

As we all know, talk is cheap. So, AXA Equitable is putting its money where its mouth is by supporting an online resource aimed at helping consumers understand VAs and what they can do for them. Called the Variable Annuities Knowledge Center, the site at www.variableannuityfacts.org covers many areas of the VA world.

According to the site, “The Variable Knowledge Center is funded by Smarter Consumer Inc., a Delaware not-for-profit corporation committed to educating and informing the public about variable annuities.” AXA Equitable and its affiliated broker-dealer are listed as the founding supporters of Smarter Consumer Inc. It doesn’t strike me that other industry supporters would be turned away.

In his talk, Condron said the industry needs to talk straight to consumers and arm them with facts about what retiring costs today. For instance, people have misconceptions about longevity, he said, but the fact is that a 60-year-old couple has a 62% chance of one of them living to age 90.

How aggressive an investment strategy do retirees really need? Condron asked. As part of his answer he said that $35,000 of retirement income in 1975 would have to be $130,000 today. Yet many people especially as they near retirement age grow more conservative in their investing and are afraid of getting burned by a down market as so many did just a couple of years ago.

Because retirees need ways to provide against the downside with lifetime guarantees, they need variable annuities, Condron said. What the industry needs to do is to start getting consumers to look at VAs as investment portfolios, he continued, for not only do VAs defer taxes, but they also offer access to the equity markets while giving life and estate protection (with the guaranteed minimum death benefit) and income and principal protection (with guaranteed minimum income benefits and guaranteed minimum withdrawal benefits).

In fact, he said, it is these last two benefits that are driving VA sales because “they are floors for people to tolerate the risk of equities.”

Do these benefits have a cost? Of course they do, Condron said, and let’s be upfront and acknowledge those costs. Ask consumers, “Is it worth a 100 basis points to insure your life and insure your income?”

When presented this way, it’s hard to think that consumers won’t respond. And these facts, combined with “zero tolerance for unethical sales practices,” should go a long way to countering the VA’s bad buzz.

Well done, Kip. Finally.

Steve Piontek

Editor-in-Chief

It was a bracing moment at the 16th Annual Conference for Life Insurance sponsored by PricewaterhouseCoopers in New York earlier this month when Kip Condron, chairman and CEO of AXA Equitable, said, “It is time for us to stand up and be counted and say that variable annuities are designed for retirement.”