When guaranteed minimum death benefits first debuted on variable annuities a decade ago, critics said they wouldn’t fly. The stock market was in overdrive, so what was the point, said these oh-so-wise souls.
Then came the market swoon in the recession of the early 2000s. Suddenly, those guarantees were looking pretty good to those who had them (and worrisome to those who were underwriting them).
Where were the “you don’t need this” pundits then? Probably, they were in hiding, peeling egg off their faces.
So it goes with new insurance products. Their value and market positions often don’t get any respect–until after they’re tested in the wild and woolly marketplace.
Think back to the dawn of equity index annuities, also in the 1990s. Most insurance mainliners didn’t pay them any heed. “Those things are too complex,” they said. “Few will want them.”
Ah, but once the early EIA buyers saw account growth by the late 1990s and continued interest crediting during the early 2000s, that talk vanished–and index annuity sales spiked. Where did all the “too complex” people go then? Maybe some went to the National Association of Securities Dealers. Others probably started developing index annuities of their own.
So far, this story makes new product critics sound like jerks.
They are not jerks.
Sure, some are probably worrywarts, reacting to new product concepts with more fear than reason. Others may be competitors who criticize virtually any product that their own firms do not manufacture or sell.
But a good many others are serious critics who seem to have noble impulses. They may be experienced executives or analysts who, if they spot gaping holes in a new product design, voice concern on behalf of both consumers and the industry. They want to sound the alarm before the product causes irreparable damage.
Serious critics can do more good than harm. Think back to those who chipped away at the early GMDBs. They pointed out that not all such features are alike–and that helped spur advisors and clients to learn how to evaluate the features before deciding which, if any, to pick.