Because different annuity products are offered with varying benefits and selling propositions, those selling annuities can’t use the same sales pitch for every customer they encounter. To succeed, they must understand the needs and financial priorities of clients and prospective customers.
That’s the kind of thinking behind new research from LIMRA Secure Retirement Institute (LIMRA SRI). “LIMRA SRI published a study of recent annuity buyers, comparing the age, contract size and types of products of individual annuity owners to help advisors and companies better understand the profiles of different annuity buyers,” said Todd Giesing is director, annuity research at LIMRA SRI, in a recent column on InsuranceNewsNet Magazine.
To start with, he explained that LIMRA SRI has found three different categories into which pre-retirees and retirees can be divided:
- Guarantee seekers – With an overwhelming preference for creating a lifelong stream of guaranteed income, such consumers tend to have low risk tolerance and solid trust in their advisors.
- Estate builders – Viewing portfolio growth as paramount, such customers typically want more control over the way their assets are managed, have high risk tolerance, and exhibit cautious trust in their advisors.
- Asset protectors – Such investors are focused primarily on preserving their assets, have low risk tolerance, and typically have larger holdings of CDs and Treasury bills.
“Variable annuity buyers may choose different types of VAs based on their investment objectives,” Giesing said. Of the US$68.4 billion in retail new premium for VAs sold in 2018, he said US$37.4 billion was from clients seeking guaranteed income, who bought products with some form of guaranteed living benefit (GLB). US$31 billion of VA retail new premium was sold to market growth-oriented clients, who either declined to go for a GLB or got products that offered no GLB at all. The remaining amount, less than US$1 billion, was bought for both protection and market growth; sales within that segment included VA with a guaranteed minimum accumulation benefit rider.
“For many, creating a guaranteed income stream drives their interest in purchasing an annuity, but others value the asset protection annuities offer, and still others prize the tax deferral advantages and opportunity for portfolio growth,” Giesing said, underscoring the importance of defining the different profiles and associated priorities of annuity buyers.
He also touched on other factors that affect the annuity purchase decision. LIMRA SRI has found that the average age of all annuity purchasers, except those who bought fixed immediate annuities, ranged from 58 to 67. VA buyers who opted to get GLB were 63 years old on average, as opposed to non-GLB buyers with an average age of 58.
Indexed annuity buyers, meanwhile, were 63 years old on average and looked for protected growth, guaranteed lifetime income, or both. Two-thirds of indexed-annuity premiums are coming from individuals between 56 and 70 years old, which Giesing said is a clear sign that near-retirees and retirees want guarantees for a portion of their retirement assets.
Turning to fixed-rate deferred annuity buyers, he said they tend to be 67 years old on average, and they pay an average initial premium of US$103,000 — lower than that paid by other groups for other types of annuities. “These buyers likely display asset protector characteristics and are looking for a blend of principal protection and guaranteed growth,” he said.