5 Sources of Drama in Annuity Product News Now

Insurers are also sending out notices about procedural changes developed to accommodate the fact that most people are working at home, and that financial professionals in many areas may no longer be able to see clients in person.

3. Prices for the products still on the market are getting worse.

In the income annuity market, for example, “many carriers have been updating their rates,” Toland said. “The rates for pure lifetime income are often not quite as sensitive, because they are very long-term, but this is an unprecedented environment.”

4. The changes look necessary.

As sobering as the changes are, what may be more sobering is market observers’ quick acceptance of the changes.

Suspending the sale of an annuity “is the fastest response the insurer can make to a change in market conditions, which we obviously are seeing in this new black swan event,” Toland said. “It is incumbent on insurers to act responsibly in providing security and peace of mind in their products. The pricing dynamics include considerations of interest rates and the price of instruments used to back their products, of course. However, they also include factors such as policyholder behavior, which greatly affects both lapse expectations and utilization of elective benefits.”

5. Issuers feel the need to warn annuity holders against “panic selling” their stocks.

Athene, for example, is encouraging financial professionals to offer clients an article about how to survive a stock market dip.

On the other hand, the current period of turmoil has also given life insurers to explain why annuities, and annuity guarantees exist.

American Equity, for example, has sent a letter encouraging the company’s partners to talk about the “Safety and Sleep Insurance” that an annuity can provide.

“An American Equity annuity protects your clients from declines in the equity and bond markets,” Anant Bhalla, the company’s chief executive officer, wrote in the letter. “This principal protection is a foundational strength during market or economic uncertainty.”

“This reminder of the risk of another black swan — and one coming from an unexpected quarter — is likely to increase the demand for guaranteed products once the dust settles,” Toland wrote. “This is yet another demonstration of sequence of returns risk and the importance of income planning in and around retirement.”

— Read 5 Things to Know About Pandemics, for Annuity Sellers, on ThinkAdvisor.

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