The proportion of variable annuity buyers electing guaranteed living benefits increased by two percentage points to 89% in the third quarter, according to the latest numbers from LIMRA.

Third quarter sales generated $21 billion of new deferred variable annuity premium resulting in year-to-date sales of variable annuities with GLBs of $58.5 billion, 3% higher than during the first three-quarters of 2009.

The guaranteed lifetime withdrawal benefit (GLWB) election rate increased to 65%; guaranteed minimum income benefit (GMIB) riders were elected 18% of the time; and the guaranteed minimum accumulation benefit (GMAB) election rate increased to 4% in the third quarter of 2010.

Dan Beatrice, senior analyst at LIMRA in Windsor, Conn., said that some of the uptick is due to product innovation, “not really what it was back in the day, but GLBs have become somewhat more competitive,” and that’s helping sell more variable annuities.

Rather than any true innovation, he said, product providers are modestly improving the “richness” of their benefits, meaning annuity buyers get a little more for their money than they did in the last couple of years when insurers were struggling to manage risk. “The stock market has improved, so the amount to which contracts are in the money has dwindled considerably,” Beatrice said.

“In the money” means insurers are on the hook for payments to annuity holders in excess of what the market is paying, and those features helped GLB election reach a peak of 90% in the first quarter of 2009, up from 81% in the first quarter of 2008.

Kate Theroux, LIMRA’s spokeswoman, predicted that GLB election will continue its upward climb in 2011. “Even though we’re seeing a glimmer of hope in the economy and as the market improves, consumers are still very aware of the losses they incurred, so the security of guarantees is still very valuable and that’s likely to continue well into next year,” she said.