The variable annuity industry must do better at getting its message across to consumers, industry executives said at last week’s annual meeting of the National Association for Variable Annuities.
In a speech at the meeting here, NAVA’s vice chair, Pamela Schutz, maintained industry groups need to unify behind a message to consumers and legislators that annuities are “the only product that offers guaranteed income for life.”
NAVA wants to join with the American Council of Life Insurers, Washington; the National Association of Insurance and Financial Advisors, Falls Church, Va.; the Million Dollar Roundtable, Park Ridge, Ill.; LIMRA International, Hartford, Conn., and other organizations to deliver a unified, clear message about the value of annuities, said Schutz, who is president and chief executive officer of Genworth Financial’s retirement income and investments unit.
“We need to improve the perception of annuities,” she said. “There’s a lack of understanding and in some cases loathing of our products.”
Schutz called for industry unity in lobbying and educating legislators, including sending top corporate executives to Capitol Hill to lobby Congress for laws encouraging annuity purchases to help consumers prepare for retirement.
The industry also needs to increase efforts to make it easier for consumers to buy annuities.
Specifically, she urged the industry to step up efforts to achieve straight-through processing of contracts.
[NAVA, ACORD and other industry groups have long advanced straight-through processing as a way to increase annuity sales by making it easier to sell annuities through the Web. Its widespread use would allow agents to submit e-applications for annuities, eliminating the need for home office employees to enter the information manually into a carrier's computer system.]
“Making it easier to transact annuities is important to the industry,” said Schutz. She called for a summit meeting of leading insurance organizations to advance the use of STP in selling annuities.
Michael Fraizer, chairman of Genworth, followed Schutz on the program, warning that many of the 7,900 baby boomers who turn 60 every day are at risk from dual savings and financial protection shortfalls.
He said VAs provide one answer but are a “complex, poorly understood product with a cumbersome sales process.”
The industry needs to focus on what is becoming a huge market, with retirees moving $8.7 trillion from accumulated savings to income products in the next five years, he said, citing McKinley & Co. estimates. Developing consumer-friendly products, focusing on transaction ease and developing innovative products that fit retiring boomers’ financial and health care needs are essential for the industry, he said.
“Annuities should be as easy to purchase as mutual funds,” Fraizer said. “We need to take bold steps in that direction.”
He said a benchmark standard for annuities to guide consumer purchases, similar to the ones Morningstar provides for mutual funds, is needed.
“We also have to borrow data and technical standards from other industries, such as banking, to make it easier for consumers,” he said.