David A. Rains, Managing Director and Healthcare and Life Specialty Leader and Michael R. Parker, Managing Director, Senior Business Development Broker
Next generation products will soon arrive to deliver the guaranteed retirement solutions today’s workforce needs and which variable annuities with guaranteed minimum withdrawal benefits currently address, albeit in overly complicated products.
The successful annuity writers of the future will:
- Feature simplicity, enabling “pull” rather than “push” marketing — they will be reasonable and transparent solutions for the average consumer and compete favorably against “self-insuring” via mutual funds or other traditional savings vehicles.
- Be low cost while providing relevant protection. This includes both the insurance and investment components, ensuring costs compare favorably to passive indexed mutual funds, adjusted for insurance values.
- Favor “buy-and-hold” consumers. Future annuities may not experience the relatively high lapse rates inherent to commissioned channels and must maintain expected profitability in all policyholder behavior scenarios.
- Scale to expected demand of future retirees. The need served by the fee-based channel is immense, and companies must be prepared with both technology infrastructure and capital solutions.
These next generation products will likely follow a familiar life cycle: initial incubation by a few market leaders followed by explosive expansion to virtually all writers. Early on, product differentiators will evolve as companies vie for a share of the market, but eventually product features will commoditize.
This piece first appeared on BRINK.
Link to Part IV >>
Link to Part I >>
Link to Part II >>
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