IRI releases State of the Industry Report
By Cathy Weatherford
Insured Retirement Institute (IRI)
Washington, D.C. - The Insured Retirement Institute (IRI) today released a new report providing a 2013 outlook for the insured retirement industry. The forecast indicates that many of the trends and dynamics that marked 2012 will continue into the new year-namely financially sound insurers, ongoing product innovation, and demographic factors driving consumer demand for retirement income, which will balance economic forces such as low interest rates.
"Many of the same forces that were factors this year appear to be here to stay for some time, particularly regarding demographics, and this will continue to affect consumer behavior," IRI President and CEO Cathy Weatherford said. "Baby Boomers aren't getting any younger, health costs aren't shrinking, and defined benefit plans aren't coming back any time soon. With this emerging retirement paradigm taking hold, more and more consumers will confront the challenge of managing all the risks that come with this new reality. Market volatility and longevity risk, once not primary concerns to consumers, will influence behavior. We are seeing this now as consumers are demanding guarantees and certainty, and insured retirement providers will continue to innovate and develop products to meet this ongoing need."
One product class that will see new offerings and innovations is deferred income annuities (DIAs), which experienced its first year of significant sales in 2012. DIAs, sometimes referred to as "longevity insurance," are a form of fixed annuity that allows the owner to defer the start of the guaranteed income stream until a later date. The IRI outlook anticipates that innovations and new offerings in this class will contribute to DIAs becoming "the fastest growing product in 2013" on a percentage basis.
Within the variable annuity market, while living benefit elections during the past few years have reached about 90 percent, many companies are aggressively developing new products without a living benefit to cater to consumers interested only in tax deferral or diversifying into different asset classes. This is expected to continue into 2013. For fixed-indexed and single premium immediate annuities, ongoing innovation has been taking place on the distribution side of the business, with both product classes expanding into non-traditional sales distribution channels.
From a public policy perspective, the current "fiscal cliff" and debt ceiling negotiations remain the most immediate issue with potential to affect the insured retirement industry. With tax policy reform included in these discussions, any reduction or elimination of the tax-deferred status of annuities and retirement savings plans would negatively impact retirement savings and have vast repercussions for the industry. Given the importance of these tax incentives in helping consumers attain financial security in retirement, preservation of tax deferral will be a priority for the industry.
On the regulatory front, with elections out of the way, a long-awaited modified proposal from the Department of Labor's Employee Benefits Security Administration is expected to be re-proposed in 2013. The proposal would change the circumstances under which a professional providing investment advice is considered a "fiduciary" under the Employee Retirement Income Security Act of 1974. The industry consensus view is that the proposed rule would lead to increased costs and complexities, limit consumer choice regarding retirement plans and individual retirement accounts, and present a barrier for middle-income Americans to obtain affordable services to make informed decisions regarding their retirement plans.
A link to the full report can be found here.
About the Insured Retirement Institute:
The Insured Retirement Institute (IRI) is a not-for-profit organization that for twenty years has been a mainstay of service, commitment and collaboration within the insured retirement industry. Today, IRI is considered to be the authoritative source of all things pertaining to annuities, insured retirement strategies and retirement planning. IRI proudly leads a national consumer education coalition of nearly twenty organizations and is the only association that represents the entire supply chain of insured retirement strategies: Our members are the major insurers, asset managers, broker dealers, and more than 150,000 financial professionals. IRI exists to vigorously promote consumer confidence in the value and viability of insured retirement strategies, bringing together the interests of the industry, financial advisors and consumers under one umbrella.
IRI's mission is to: encourage industry adherence to highest ethical principles; promote better understanding of the insured retirement value proposition; develop and promote best practice standards to improve value delivery; and advocate before public policy makers on critical issues affecting insured retirement strategies and the consumers that rely on their guarantees. Visit www.IRIonline.org today to experience the vast resources of the Insured Retirement Institute for yourself.