More financial service companies are focusing on the retirement income market, but they are moving away from using immediate variable annuities as the primary way for consumers to generate retirement income.
That is a key finding of the 2006 study of retirement income products of variable annuity issuers, conducted by Diversified Services Group Inc., Wayne, Pa.
Of the 42 companies surveyed, 12 are still actively involved in the IVA market, according to preliminary results of the survey. 3 more have an IVA but they are not actively promoting the product for sale in the IVA market.
Meanwhile, an additional 3 VA issuers have taken their IVA product off the market, choosing instead to focus on and promote alternative product choices for consumers to derive retirement income from their savings.
In addition, 8 of the issuers are active in the “substitute” IVA market. (Substitutes are VAs sold primarily for annuitization or products with strategic emphasis and packaging placed on payout options for retirement income.)
The preliminary survey results also show that industry sales of IVAs continued their downward trend, dropping to a total of $248 million in 2005, the fourth consecutive year of sales decline. But although the IVAs have been disappointing in terms of contracts sold, average premium per contract has improved.
Looking at alternative offerings, the early survey results show there is growing success in the sale of guaranteed living benefit riders on VA contracts.