Products for a Safe Trip Through a Turbulent 2013 into contracts that have been in force for a specified number of years (such as 10 years), and the IAs pay a guaranteed interest rate at today’s rates plus the potential for more (via indexed-linked interest crediting). Such products will become increasingly important in 2013, he predicts. “They give customers a good rate for the current environment, plus the opportunity to earn more without having to change out of the policy into a higher earning contract in the event that interest rates spike later on.”
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2013 Life and annuity product trends Which Lines Could Be the Rising Stars
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Indexed annuities
IAs, in particular, will fare well in 2013, according to Greg Schwabe of Massachusetts. “There will be a spike in the IA market, because people are looking for higher yields with a fixed floor,” he predicts. The lower caps on the contracts sold during the low interest rate environment could be a concern during a rising rate environment, he allows. But even if the crediting rate goes up to the policy cap, “the interest will still be where most fixed annuity rates will be at that time,” he speculates. “IAs will carry the fixed annuity industry during the year,” agrees Brendon Kelly, vice president-annuity operation, Ash Brokerage. This will especially be the case when carriers begin debuting accumulation-focused indexed annuities, he predicts. The accumulation IAs will appeal to clients who don’t want to buy annuities for income purposes, he says. In recent years, Kelly explains, IAs have focused a lot on having living benefits features such as the guaranteed minimum income benefit. That’s not a problem when the client buys the contract for lifetime income, but it does pose problems if a client buys the IA for gain and then sees interest rates go up high (beyond the cap), he says. The problem comes because the policies require the client to stay with the carrier and product so they can take the income, Kelly says. If the buyer wants gain, not income, that could trigger suitability and compliance concerns down the road, he says. When carriers start filling the void with accumulation-focused IAs, advi-
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sors will be able to offer the products for a fixed period – perhaps five or seven years – and then, when market conditions change, take the indexed gains and roll the policy value into something else, says Kelly. The products might include restrictions on withdrawal privileges – say, for nursing home confinement and perhaps on 10 percent penalty-free withdrawals – and commissions would go lower as a result, Kelly concedes. But the products will appeal to advisors who are “starved for indexed products for accumulation rather than income purposes.”
Income Annuities
Speaking of income, some experts predict that traditional income annuities – the single premium income annuities or SPIAs – will become more important in 2013. As will fixed annuities that have minimum guaranteed income riders, says Michael Pinkans, senior vice president-marketing, Zenith Marketing Group. “Even though many carriers have cut back on features in the annuities, everything is relative,” Pinkans adds. “These products are still a good deal for the
Traditional Fixed Annuities and Multi-year Guarantee Annuities Variable Annuities right customer.” Another income annuity that will increase in 2013 is the deferred income annuity (DIA), says Jim Dobler, national sales manager for CANNEX Financial Exchanges, a firm that specializes in providing SPIA services. He is referring to the longevity annuities, which clients typically have many years before taking income, perhaps not even until deep into retirement. There are six DIAs on the market, Dobler says. “Within the next 12 to 18 months, we expect most SPIA carriers will offer the products. If they gain traction, we expect variable annuity and fixed indexed carriers will follow in three to five years.” With interest rates so low now, he points out, “there is little risk to the consumer between the time of purchase and the time of utilization, and very little risk to the carrier. Most of the companies will be investing with very safe guaranteed products, and they really don’t need to hedge.” The carriers will start distributing DIAs first through producers in the insurance industry, Dobler predicts. “If it takes off there, they will branch out to
January 2013 » InsuranceNewsNet Magazine
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