When you’re anointed the latest hot product, others will naturally take notice and want to follow your lead. So it is with indexed annuities.
According to Conning Research & Consulting, between 2005 and 2010, indexed annuities charted a 9.3 percent compound annual growth rate in the number of in-force contracts. That compares to 1.9 percent for variable annuities and 2 percent for traditional fixed annuities. Since the compound annual growth rate for the target population of likely annuity buyers grew by 2 percent during that same time period, indexed annuities grabbed the largest share of that potential sales pot.
And that growth trajectory should continue. Scott Hawkins, (below right) vice president of insurance research and consulting for Conning in Hartford, Conn., recently authored a study entitled, “Indexed Annuities: New Growth Opportunities.” Last week, he detailed the opportunities and challenges indexed annuity providers face in today’s economy.
In this article, he speaks about how new distribution channels and methods are changing the indexed annuity landscape.
The return of the “captive agent?”
Over the past several decades, the life insurance industry has shifted away from the captive, or home office, agent prototype toward independent distribution networks. In that way, carriers avoid the human resources costs, and instead pay for production, Hawkins says.
So when Allianz announced its exclusive distribution channel for its fixed index annuity, Hawkins’s interest was piqued. In a sense, these are “virtually tied agents,” and represent something of a return to the captive agent model, he asserts
It’s not unusual for a carrier to require a distributor or agent sell a specified amount of its products, Hawkins says. The Allianz model goes further, however, in that the distributor/agent must submit its materials to the carrier for suitability review.
“There are examples of firms that have worked with distribution FMOs to set up a product, but not to that level of exclusivity. That was the new thing that made me want to write about it and say, hmmm, this may signal an emerging trend,” Hawkins says.