What changes are in store for the annuity market in 2010? Two leading experts share their outlook in Part 2 of a preview to ASJ’s complete insurance market outlook, which will appear in our upcoming January 2010 national print edition. To read part 1, click here.
The market outlook for fixed annuities (FAs) will continue to be very strong throughout 2010. 2009 has seen a strong sales performance in all fixed annuity products; book value, market value, indexed, and income. The first three quarters of 2009 showed book value and market value-adjusted FAs were growing 50 percent over 2008, while indexed product sales grew 20 percent over 2008.
Income annuities will begin to increase as new product designs add important features such as return of premium and long term care. NAFA spoke at a recent symposium for income annuities, and there is a growing interest outside the independent distribution and banking channels to learn more about utilizing guaranteed income products for customers concerned with outliving their income or not having enough time to recover from another market drop. It seems that other channels are just now discovering what independent producers have known all along.
Despite the uncertainty created by the SEC’s Rule 151A, consumers recognize the benefits of indexed annuities as a result of producers’ efforts to educate and inform interested clients. NAFA sees that energy continuing throughout 2010. Additionally, suitability and disclosure enhancements will continue to evolve as states, the NAIC, and individual carriers incorporate new standards. Research continues to show that the overwhelming majority of fixed annuities are purchased by middle-class Americans – and eight out of 10 have annual income of less than $100,000. Given the uncertain economic outlook, more people will continue to look for safety and protection from market fluctuation and uncertainty – and only one product meets those goals while also providing guaranteed income, minimum interest, and liquidity features for emergencies – the fixed annuity.
Kim O’Brien, executive director, National Association for Fixed Annuities