Deferred Income Annuities Poised for Record Year in 2013
The Insured Retirement Institute forecasts a financially sound year for insurers as the industry continues to address changing demographics and consumer demand.
Insurance Networking News, December 17, 2012
Deferred income annuities will continue their ascension in the life sector, according to a 2013 forecast from the Insured Retirement Institute. The “State of the Industry” report also forecasts financially sound insurers, ongoing product innovation and demographic factors driving consumer demand for retirement income, which will balance economic forces such as low interest rates.
“Many of the same forces that were factors this year appear to be here to stay for some time, particularly regarding demographics, and this will continue to affect consumer behavior,” IRI President and CEO Cathy Weatherford said. “With this emerging retirement paradigm taking hold, more and more consumers will confront the challenge of managing all the risks that come with this new reality. Market volatility and longevity risk, once not primary concerns to consumers, will influence behavior. We are seeing this now as consumers are demanding guarantees and certainty.”
DIAs experienced their first year of significant sales in 2012, and the report singled out this product as representative of the new market.
“DIAs, sometimes referred to as ‘longevity insurance,’ allow the owner to defer the start of the guaranteed income stream until a later date,” the report stated, before predicting “that innovations and new offerings in this class will contribute to DIAs becoming the fastest growing product in 2013 on a percentage basis.”
Within the variable annuity market, while living benefit elections during the past few years have reached about 90 percent, according to the report, many companies are aggressively developing new products without a living benefit to cater to consumers interested only in tax deferral or diversifying into different asset classes. This is expected to continue into 2013. IRI also found that, in terms of fixed-indexed and single premium immediate annuities, both product classes are expanding into non-traditional sales distribution channels.
From a public policy perspective, the current “fiscal cliff” and debt ceiling negotiations remain the most immediate issue with potential to affect the insured retirement industry, according to the report.
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