The State of the Annuity Industry Through a Big-Screen Lens
I’m a movie buff.
During the recent Writers Guild strike, I revisited classic movies to fill the gap and was inspired by the American Film Institute’s 100 Greatest Movie Quotes of All Time.
Here’s the story of the annuity industry in seven scenes, each introduced by a famous line from a movie.
Grab a bowl of popcorn, take a seat and enjoy the show.
1. “The stuff that dreams are made of.”
“The Maltese Falcon” (1941)
Current demographics are the annuity industry’s dream.
The baby boomer generation is aging, and we’ll soon experience Peak 65, when more Americans turn the traditional retirement age of 65 than any time in history.
The audience for annuity products and services is at an all-time high.
The rebound in interest rates is another factor.
Industry think tank LIMRA forecasts that annuity sales will surpass $300 billion once again in 2023, with continued growth for the next four to five years.
It doesn’t take Sam Spade to detect that things are very promising.
2. “Fasten your seatbelts. It’s going to be a bumpy night.”
“All About Eve” (1950)
Despite the promising forecast, the industry can’t rest on its laurels.
Carriers and distributors must be prepared to face obstacles like market volatility, potential commercial real estate foreclosures and the aging agent population.
The rise in interest rates that’s fueling the multiyear guaranteed annuities momentum and the significant improvement in fixed index annuity terms also means a resurgence in safe money alternatives, like certificates of deposit and money market accounts.
As the competitive advantage of annuity rates narrows or disappears, some insurance sales professionals will have to learn or refresh their presentation and comparison techniques.
3. “They’re here!”
“Poltergeist” (1982)
Private equity is the specter in our industry — on both the carrier and distribution side.
While some dread private equity, its foothold has been a source of product innovation and technological advancement. And it’s prompting the industry to up its game.
Does it matter to policyholders if their carrier is owned by private equity? Perhaps not.
The rules and regulations on carrier conduct are universal regardless of ownership type.
But to some, the “ghost in the machine” is private equity’s commitment to the long-term nature of the insurance business.
This is in contrast to the more common demand for short-term results.
The bigger issue is the impact of private equity on distribution.
Mergers and consolidations are rampant, and that impacts product development, acquisition costs and agent access.
All carriers — private equity-controlled or not — will have to carefully consider the rules of engagement here.
4. “Toto, I’ve a feeling we’re not in Kansas anymore.”
“The Wizard of Oz” (1939)
The insurance industry used to be known for its geographical epicenters.
Hartford, Connecticut, and Des Moines, Iowa, come to mind.
That’s changed.
Product design and innovation is as likely to come from Silicon Valley as Kansas, Iowa or Connecticut.
Distribution is remarkably decentralized at both the retail and wholesale level.
And video conferencing, along with sales and annuity order entry, makes remote sales easier than ever.
5. “I feel the need — the need for speed!”
“Top Gun” (1986)
And the competitive advantage goes to … carriers that address speed to issue and disbursement.
