This is the first of a series of articles that will be published on the annuity space. Subsequent articles that will dive deeper into different trends discussed in this article will be released over the next few weeks.
Many financial advisors are still seeing the insurers with which they do business raise prices, decrease benefits and features, discontinue products and, in some cases, even exit the business. Despite the somewhat steady growth of the US economy in early 2012, the global economic outlook looks less certain. And, unfortunately, an extended period of historically low interest rates and increased pressure on insurer profitability looks more certain. These concerns will continue to have a negative impact on annuity writers and will send companies in search of sustainable, yet profitable, product designs. As a result, we expect to see an ongoing revamp of products, features and investment options during the remainder of 2012 and into 2013.
For an advisor, agent or wholesaler in this environment, this means there is a heightened need to understand not only what product suites your providers are offering, but also to understand the changes that competitors are making to those product suites and how they affect your clients and their financial decisions. At Ernst & Young, we have identified five trends that we believe will significantly impact the annuity and retirement landscape over the next 12 to 18 months.
#1. Continuing change and innovation in the variable annuity space. During the first quarter of 2012, Hartford Life announced that it will no longer sell variable annuities. This follows the exit of Sun Life, Genworth and ING in 2011, and the scale-back by MetLife throughout 2011 and 2012. Consequently, distributors are now very sensitive to the possibility that a company may not offer variable annuities in the future.
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