Taking a micro view of responses, Raham shared ten key thoughts that sit top of mind for today’s insurance decision makers:
- Advisors want simpler products
- Consumers don’t understand complex index annuities
- There must be a better way to get guaranteed income
- It’s back to the old days, focusing on tax deferral and capital growth
- The froth in the index annuity market feels like the early days in the variable annuity market
- The next wave of innovation is on the horizon
- New annuity business is down in 2013 but exchanges and transfers are up 50 percent
- Sales per advisor were twice as high in 1995
- Private equity firms may not focus on customer priorities first
- A psychological barrier to deferred income annuities still exist
From a macro view, five key themes emerged as potential impediments to annuities’ future success: New entrants to the market, Suppliers, Buyers, Substitute offerings and Rivalry among existing competitors.
Raham defined these five items as forces that impact current annuity players equally and expounded on a few of them in regards to today’s competitive annuity marketplace.
- New entrants: “Start-up annuity companies are making headway on selected platforms but are not widespread yet. Private equity firms are entering the marketing but have a different focus from the traditional market participants.”
- Suppliers: “The legacy technology exerts significant negative pressure.”
- Rivalry: “Lack of alternative growth opportunities drives competition based on increased complex annuity features and pressures profit and sustainability. Insurers are pushing each other to innovate while also being pushed to lower risk exposure.”
Before adjourning, Raham offered solutions for the industry to combat forces pushing against the industry.
- Rebuild trust that we will be there for the long-term.
- Compete on the basis of improved customer confidence and outcomes
- Compete on service and experience rather than price and complexity
- Compete in other ways that first support the growth of the entire market, then focus on individual company positioning
Finally, Raham turned the discussion to distribution where he said there is a “continued shift to planning and outcome management.”
Planning based on outcomes has become a differentiator, according to Raham. “It’s being looked at like this: The insurance industry is able to say, ‘we are here for you. We will develop a plan for you.’”