New research from TowerGroup has revealed that in order to capture a larger slice of the retirement asset market, insurers must make strategic changes in their approach to annuities to reduce product complexity and improve both the sales process and suitability screens.
Currently, over 40% of US variable annuity sales are generated from existing annuity assets. The stats indicate that insurers have not yet convinced a large percentage of current or future retirees that annuities are central to a comprehensive retirement plan.
TowerGroup estimates retirement assets in the US represented $18.5 trillion in 2007. In addition to demographic shifts relative to aging, ethnographic changes are also reshaping the country. By 2020, the foreign-born population in the US will reach 15%, the highest level in more than 100 years.
TowerGroup believes that insurers must address this change by adapting their financial products to better suit diverse populations and varying cultural habits. To appeal to the changing retirement market, insurers must reconfigure and enhance their annuity offerings – reducing product complexity by returning to the basics.
TowerGroup recommends that insurers consider: creating a client bill of rights; changing the compensation structure around annuity products; more closely monitoring sales practices; enhancing disclosures for customers; and making it easy overall to do business in this area.