Indexed annuities poised for growth: Conning
By Paul Wilson
ProWEB Wire (Industry News)
A combination of factors has created a strong environment for indexed annuity growth, according to a new study by Conning Research & Consulting.
The study, “Indexed Annuities: New Growth Opportunities” found that economic changes, regulatory shifts, consumer preferences and variations in equity markets have created a positive environment for further growth.
"Since the financial crisis, the limitations to indexed annuity growth have given way to a more positive set of conditions for insurers in this line, and we saw new products and more importantly new players, entering the market," said Scott Hawkins, analyst at Conning Research & Consulting.
Uncertainty about distribution channels and negative publicity about products combined with improving equity markets put severe pressure on indexed annuities, he said.
In addition, interest in fixed annuities has been curtailed by low interest rates, while equity market volatility has negatively affected consumers’ interest in variable annuities, according to Hawkins.
As other annuities face these challenges, consumers are increasingly drawn to indexed annuities’ guaranteed investment returns and the potential to earn extra returns, he said.
"The indexed annuity line of business has the highest concentration of the three individual annuity types, certainly in part due to the product complexity and hedging requirements,” said Hawins. “Yet as annuities have struggled to compete for share of wallet with mutual funds, indexed annuities may prove to be a competitive advantage for those insurers who can meet the product, investment, and distribution challenges of this line."