It’s been interesting to see the industry dialogue about income products evolve over the last 5 years.
At the beginning of this period, immediate annuity discussions seemed to focus on “When will these take off?” or “Don’t demographics mandate these being a future hit?”
In the last 2 years, the industry has instead embraced the concept of marketing “retirement products,” including both products that help save for retirement and those that distribute income. Immediate annuities play a significant role in this push, but have become part of a holistic solution rather than a stand-alone one.
In another recent development, combination products have become a popular topic in the life insurance industry. Most often these combine some sort of long term care benefit inside a base life insurance or annuity product.
Given the interest in LTC-oriented products, it would be interesting to explore the possibility of creating combination products focused on income–thereby merging 2 recent trends. Such a combination raises a few questions, as follows:
1) Does the concept of the combination product apply to income solutions?
For instance, would there be a market for a life insurance product that offered a cash surrender value but also provided a secondary, higher value only accessible through some sort of life income? One could see a situation where the surrender value available in cash would be lower than that offered on products not having the income option (one-tiered), while the value available through life income would be higher than the cash surrender value on a one-tiered product.
Would the market embrace this feature? Is there marketing play in having life insurance until retirement and then income thereafter (rather than a pot of cash surrender value that can be used in a variety of ways, including income)?
From an insurance company standpoint, does this lengthen duration of the contract such that it can offer increased value to customers when compared to the one-tiered product?
2) What about income as an option in participating whole life insurance?