If you have a roomful of annuity experts together, you’d think there’d be more debate and disagreement, but that’s not the case. Oct. 19-21 in Boca Raton, Fla., the 2011 NAFA IMO Summit, “Building on Success,” took place and you would have thought it was the pastor preaching to the choir there were so many amens spoken. The consensus was this: innovation of products and competition from non-traditional annuity players will have a bearing on the landscape.
We spoke with event speakers Sheryl Moore, Eric Thomes and Allan Grissom to get their thoughts. In addition, just to make sure the Kool-Aid hadn’t been spiked, once we got back from the conference, we contacted additional annuity experts Dana Pederson and Jeremy Alexander.
On the following pages, read highlights from our conversations with these five esteemed annuity gurus.
This is the most challenging environment we’ve seen for insurance agents because of fixed annuity rates averaging a little over two percent. But GLWBs (guaranteed lifetime withdrawal benefits) are an agent’s saving grace. It really gives agents an opportunity to talk to clients about guaranteed income and they can drive the point home by talking about how you can save Americans’ future with guaranteed income. Now, more than ever, agents need to look into these riders. And, the good news is, it’s happening. Currently, 60 percent of indexed products are elected with GLWBs on them.
An outlook for the annuity business:
As I said earlier, this is a challenging time for agents to make annuities sales propositions. But, it’s also a great time to be in this business. We all know how tough it’s been with the economy since 2008. But it’s opened the door for consumers. People have gotten savvier about finances the last three years. They want to get the best deal and they’ve taken control of their finances. They’re out, they’re researching the products, and they’re finding that indexed annuities are a better value proposition when compared to CDs. It’s opened the door to so much more consumer traffic for these products. When they do the research, people are finding out that annuities are the solution to the fear they’ve had about their finances since 2008.
President and CEO
On the annuity environment:
Even in light of the low-rate environment, carriers are pushing their annuity products out the door. Frankly, it’s because we’re in a good environment for fixed and indexed products compared to CDs and Treasuries. If the carriers can make 3 percent and offer 2 percent on a product, well, in this environment, they’ve got the banks beat. The carrier’s secret: When pricing a fixed annuity, the carrier can go out longer than the rate guarantee while the bank must buy three-year paper for three years.
On product diversity and broker-dealers:
It’s good for the carriers to diversify their portfolios because they need that diversity to get a strong rating. With all the suitability involved from the broker-dealer side, it really legitimizes the products and broadens their appeal. There may be short-term pain points, but there will be long-term comfort to the consumer. To broaden the market is a good thing.
On rate hikes:
I don’t expect rates to go up anytime soon, but if they did it could get a little bumpy for carriers as “retention” is the name of the game. If rates explode to the upside, and I’m not saying they will, then you could have people saying, Why am I staying with my 3 percent annuity, when the rates are at 6 percent?
Vice President of Insurance