Washington, D.C. –
The Insured Retirement Institute (IRI) released new research exploring the development and introduction to the annuities market of deferred income annuities (DIAs), which are experiencing rapid sales growth and are being offered by an expanding group of insurers. First introduced several years ago, DIAs provide another retirement income option to financial advisors – and their clients – as they develop plans to protect against longevity risk in a way that best suits each individual client’s needs.
“DIAs achieved their first year of significant sales, about $1 billion, in 2012, and sales have continued to grow in 2013,” said Cathy Weatherford, IRI President and CEO
. “While this is only a small percentage of overall industry-wide annuity sales, we expect this growth to continue into 2014. As more companies begin to offer DIA products and as they expand into new distribution channels, DIAs are becoming a viable option for consumers and financial advisors looking for guaranteed retirement income to insure against longevity risk.”
Similar to their precursor advanced life deferred annuities (ALDAs), DIAs are designed to provide income later in life to protect against the risk of outliving assets. While ALDAs never experienced significant takeup, insurers revisited the concept by shortening the deferral period. DIAs also offer more flexibility through, among other features, optional death benefits and liquidity options.
Key findings from the report:
- DIA product sales reached an estimated $1 billion in 2012 and have continued to grow during the first half of 2013.
- IRI anticipates DIA products to be the fastest growing annuity product in terms of sales on a percentage basis in 2013 and 2014.
- Income on DIA products can start between two to 40 years from issue, but most DIAs are elected with an income start date between five to 15 years from issue.
- As recently as last year, only six companies offered DIA products. Now at least a dozen companies offer or have filed to offer a DIA product.
- The average DIA buyer profile resembles that of buyers of variable annuities and fixed-indexed annuities with living benefits. The average DIA buyer is in their late 50s, with most DIAs being purchased by buyers ranging from their early 50s to mid-60s.
- Across the industry, the average income deferral period for DIA products is eight years.
- One-fifth of Baby Boomers believe that guaranteed income each month is the most important trait of a retirement investment product.
The IRI report studies the origin of DIAs, its features, customer demographics, sales data, and an overview of retirement income strategies incorporating DIA products.
The full report can be found here