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Broad VA Features Don't Always Sell Well: Cerulli

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The most comprehensive product features in variable annuities are not necessarily the most successful, according to a new report.

Researchers at Cerulli, Boston, say they have measured the impact of various policy features on VA sales and asset growth, and they found that more offerings don’t necessarily equal more sales.

Other findings include:

–VA holding periods are not greatly affected by the presence of living benefits.

–The most prominent bonus structures in VAs don’t necessarily generate the greatest sales.

–Higher benefit percentages on guaranteed minimum withdrawal benefits correlate to stronger sales, although the benefit remains misunderstood.

–Underlying fund “hedge-ability” and net performance are more valuable than cost alone.

Such findings should influence product design, suggests Lisa Plotnick, lead analyst of the research.

The most notable finding, Plotnick says: “We were able to prove that investors are willing to pay for benefits.”

Industrywide, base insurance expenses are clustered in the range of 1.2% to 1.6%, according to the researchers. The top-selling contracts are along those edges, they say.

“We recognize that VA providers must have competitive benefits to stay in the game, but we contend that the focus should shift from offering the maximum, most innovative benefits, to offering those that insurers can reasonably support,” says Plotnick.