MORTALITY PERCEPTION DRIVES ANNUITY RIDER DECISIONS even look at annuities, he recalls. They would say, “Why would I ever want that, when I can earn more elsewhere?” He remembers how people turned away from annuities earning 5 percent to 7 percent internally, because they thought the higher rates they found elsewhere would go on for a long time. They didn’t imagine anything else. That sense of going on for a long time is a factor today as well, he says, but in reverse. Today, the best interest rate a person can get elsewhere is 1 percent or maybe 2 percent, he explains. So now people tend to think that these very low interest rates will just continue on and on. This may sound irrational to financial people, but that’s what certain clients think and expect, Block says. This expectation is contributing to making annuities with living benefit guarantees look very attractive.
When Mortality Doesn’t Count
Mortality issues are not a factor for one group of clients, however. These are people who have a chronic medical
condition or a family history of relatives with chronic conditions or early death. Those clients believe they will not live a long time, so the first decision about living benefits – will I be around to benefit from this feature? – is not a factor, says Block. For them, other aspects of the annuity are more important, viewed in comparison to the interest rate environment. Mortality issues could also become a non-factor if interest rates should rise very high or if the stock market soars. Those changes could spur some clients to want to go for the higher rates or take on more risk in the stock market. In such cases, longevity could lose its influence in client decision-making, predicts Block. Some clients may reject more conservative options and think very little about their own mortality, even if they are older. The advisor’s job in such a time would be the same as it is now, he adds. That is, the advisor will need to focus on helping clients take a logical look at their situations and what could happen later on,
Wharton Financial Institution Center researCh opens the door to BOTh Middle America and High-Net-Worth Prospects
Free
Sample
Download free sample presentation, system outline, and a free report uncovering how one agent closed $1.93M with only three mailings. Go to amspuzzle.com.
800 -319 -3440 AMS1210014
he says. “A good advisor will show all the different effects, so the client can make a good decision.”
Pricing Probably Won’t Be Affected
Ruark’s Peter Gourley points out that the lower mortality finding does not mean that advisors should brace for a sudden spurt in price increases in annuities with guaranteed living benefits. “The major variable annuity carriers have probably already made changes to pricing based on mortality assumptions,” he explains. The key for advisors is to remember that mortality issues are likely in mind during living benefit discussions with annuity prospects. Even if unspoken, it’s right there in the middle of clients’ concern about outliving their money. Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at Linda.Koco@ innfeedback.com.
Case Studies
Financial professionals around the nation are experiencing as high as 2–3% response from their mailings and writing $1–2M a month as a direct result* from using the “Retirement Income Puzzle” system. Developed using the latest research and market testing, this postcard mailer and turnkey presentation is easy to present, fully scripted and reviewed by FINRA.
CALL uS AT
ANNUITY
Dave W. & reTIremenT InCOme Puzzle OvervIeW: First to run set of public workshops with the system. Three mailings for nine programs. OuTCOme: 1.35% average response rate to mailing, 207 total attendees, 60 total appointments, $1.9M closed premium, $2.24M pending plus $1M in pipeline. TODD m. & marTy W. OvervIeW: October 2011 mailing
of 10,000 pieces. OuTCOme: 89 attendees, 20 appoint-
ments set AT program, $93,400 in commissions from program, $20,000 pending, $50,000 from Clients & REFERRALS. Our top sales performers used this program more than any other in 2011.
* Your results may vary.
December 2012 » InsuranceNewsNet Magazine
37