Much has changed in the annuity world in recent months. Several carriers have exited the variable annuity business, while new channels of distribution have opened up for indexed annuities. Shadowing all these shifts is a tenacious low interest rate environment that has forced providers to alter their products to maintain profitability.
Right in the middle of all those gyrations is ING, which halted VA sales in 2009 while still maintaining its position as a top seller of fixed annuities and indexed annuities (according to LIMRA, it ranked in the top 20 sellers of fixed annuities at $1.5 billion in 2011).
LifeHealthPro.com recently spoke to Chad Tope, president of ING’s annuity and asset sales distribution, about what’s going on in the industry overall and the fixed and indexed annuity fields in particular. Here’s what the Des Moines, Iowa-based executive had to say.
LHP: New distribution channels have opened up for indexed annuities. Broker-dealers are now beginning to sell them, something they hadn’t done in the past. Why is that?
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Chad Tope: It is kind of new for the industry. When 2008 came, it changed the way that advisors looked at fixed products. It was a great opportunity because indexed annuities had really proven to fit the bill of outperforming traditional fixed products like CDs. We have dedicated our distribution to focus primarily in that marketplace, the banks and the broker-dealers.
LHP: Broker-dealers traditionally sold variable annuities. How are they responding to selling indexed annuities?
Tope: A lot of things happened. People saw their life savings or retirement savings chopped in half in a short period of time. The mindset of average investor shifted to being more conservative. The registered reps we worked with were also looking for ways to solve that need for their consumers. We used to have products with 4.5 percent minimum guarantees and we dropped it to 3 percent and we thought who’s ever going to sell a product that has a 3 percent minimum guarantee? Now if you have a 3 percent minimum guarantee that’s golden. People would love to put a lot of money in that. So the mindset of the investor has shifted and that’s opened the opportunity for people who are selling securities products to sell other alternatives, to diversify where they didn’t before.
LHP: ING did exit from the variable annuity market, yet it’s still selling fixed and indexed annuities.
Tope: We’ve always had a very strong fixed annuity and indexed annuity business. It just wasn’t identified because our variable annuity business was so large. It was the driving force of ING in the early to mid-2000s. The decision for us to move out of the VA business was one where we just felt that it wasn’t a business we wanted to be in because of the risks associated with it. It appears we shifted from variable to fixed, but we’ve always been in the fixed business. It gets highlighted more now because we don’t have the VA business anymore.
LHP: How can carriers manage risk in a low interest rate environment?