Banks expect hybrid annuities that include long-term-care riders to be the next hot product on brokerage platforms as soon as product providers ramp up their offerings in this area, Scott Stathis, Kehrer-LIMRA’s chief operating officer and managing director, said reporting on its latest Annuity Product Management Roundtable, held in Chapel Hill, N.C., on Monday and Tuesday.
The 15 banks present at the event ranged from the very largest to community banks. Kehrer-LIMRA polled them throughout the event on what was working, what wasn’t and where they saw opportunities for future growth.
Most bankers, 57%, said that out of a choice of seven annuity types, hybrid annuities with a long-term-care component are the most likely to take off in terms of sales.
“Banks think these combo products best meet their customers’ evolving needs,” Stathis said.
Providers at the meeting said they recognize the opportunity, but there’s a lot of risk involved from an underwriter’s perspective.
“They all said they had products in the works, but no one wants to dive in first,” Stathis said. “There have been combo products for a long time, but now tax changes have put them on the radar so everyone’s looking at them. The problem with the first ones is that more people used them than they thought.”
Tax changes mean that money in a hybrid product that is used to pay for long-term care isn’t taxed, he said.
In terms of what’s selling now, 67% of bankers said fixed annuities with between two and four-year terms are selling the best, followed by 22% who said five- to seven-year products were most popular. While rates are still very low, they’re a little higher on these longer-term products than they are on one-year annuities, which bankers say aren’t selling at all.
Meeting attendants were upbeat about indexed annuities’ future. While Stathis said that indexed annuities “are getting cannibalized by indexed CDs right now,” 41% of bankers said indexed annuities are somewhat important and 18% said they’re very important to future revenues. “Once their guarantees get a little richer, they’ll start winning the day,” Stathis said.
Banks don’t expect fixed annuities to do much this year, with 65% of attendants saying they expect sales to be flat. Variable annuities look brighter, however. So long as the market keeps improving, 68% of bankers said they expect VA sales to follow suit.
Bankers said they want more simplified variable annuities, not because they expect simplified products to sell well — 58% of bankers said simplified annuities would play no more than a minor role in sales — but because simplified variable annuities are a gateway to the products that reps actually sell.
“Banks want these VAs with training wheels because advisors who don’t currently sell VAs will graduate to VAs with more features,” Stathis said.