2020 – A Year Like No Other
Over the holidays while reviewing a client’s file from 27 years ago, I noticed we had offered a product for sale that may have been the first fixed-indexed annuity available. The insurance carrier, Keyport Life, offered a linked to the S&P 500 Index, a participation rate of 85%, guaranteed for seven years with no downside risk whatsoever to the client.
Obviously, this product helped spur the interest in new and exciting fixed-indexed products at that time. Actually, sales were so good that Keyport Life had to exit the market altogether due to clients finding a deal like no other.
Roll forward to our current interest rate environment which has been driven down due to the pandemic issues of 2020 to the lowest rates we have experienced. And what is glaringly obvious is that the life insurance and annuity market has had to make substantial reductions in offerings to the public. Going forward, the insurance companies have no choice but to try and alter what the actual benefits will be to new policyholders in order to stay viable.
What can be done to increase the appeal on new policies? Number 1, charge more for benefits or number 2, have the policy holder accept more market risk. Either of these solutions, or a combination of both, will be beneficial as long as the markets perform well.
Otherwise, suitability for safe money may not look favorable for conservative seniors who want to count on lifetime savings during retirement. Memories become short when account balances decrease.
So, be nimble, informed, and flexible in finding what works best for clients moving forward.
We’re here to help, just like 27 years ago, when the fixed-indexed annuities burst onto the scene. Changes will continue to evolve and insurance products will continue to be acceptable if the consumer is first and foremost.
As always, contact your InSource team for assistance at (800) 732-1489 or firstname.lastname@example.org.