Annuity issuers are getting their strength back and are ready to go after new market opportunities, according to analysts at Conning Research and Consulting.
Scott Hawkins, an analyst at Conning, Hartford, has prepared a report that identifies new products, untapped demographic segments and developing overseas markets that could have the potential for growth.
Inflation-indexed annuities tied to the consumer price index hold particular promise for insurers, Hawkins says.
Inflation-linked annuities already account for about 25% of annuity sales in the United Kingdom, Hawkins says.
“In the U.S., most annuities offer at best a 3% to 5% annual ratchet, which is not the same, as inflation can outpace these growth rates,” Hawkins says. “Lincoln Financial Group, to my knowledge, is the only U.S. insurer marketing an inflation-indexed annuity.”
Medically underwritten annuities that increase the payout as life expectancy decreases all offer growth potential, Hawkins says.
Widely available in Europe, “enhanced” or “impaired annuities” are likely to gain traction in the United States as the U.S. subsidiaries of European insurers expand their U.S. presence, Hawkins says.
New U.S. Prospects
There are about 157 million consumers in generations X and Y, compared with just 81 million baby boomers, according to U.S. Census data.
All of those consumers need to save for retirement.