The industry can expect higher fees and less flexibility in the guaranteed living benefit riders that come with variable annuities (VAs), according to the findings of a recent review of industry VAs conducted by Bellevue, Washington-based Symetra Life Insurance Co. The review, which included products from 10 of the largest VA providers, found widespread increases in the fees charged to customers, reductions in guarantees and benefits offered under many riders and, in several cases, elimination of an entire guaranteed living benefit offering.
“A couple years ago, we started to see the market change to a great degree, and some of what’s happening now may be a response to the current market situation,” says Colin Johnson, a Symetra spokesperson. “But there had been a proliferation of living benefit guarantees, and this had helped ramp up the VA market, so it is interesting to see a ratcheting down of flexibility and an increase in fees.”
Among other findings, the review showed that nine out of the top 10 VA providers raised fees on multiple living benefit riders within their VA product suite through 2008. In addition, eight of the 10 carriers have discontinued at least one guaranteed living benefit rider from their VA lineup, Symetra stated in a press release.
Even within existing VA contracts, Symetra’s review showed that VAs providers are offering less flexibility to their clients in terms of the investments they can make.