Ruark: GMWB Use Below Expectations
January 22, 2010 by N/A
Use of the guaranteed minimum withdrawal benefit option offered with variable annuities has been lower than originally expected.
Consultants at Ruark Consulting L.L.C., Simsbury, Conn., an actuarial consulting firm, come to that conclusion in a new study.
Ruark consultants analyzed 3 million policy years of experience data from 7 major VA issuers that was collected from January 2005 to June 2009.
When the consultants looked at owners whose annuities included a guaranteed lifetime withdrawal benefit, they found that only 1 in 5 are taking partial withdrawals. Among owners who are taking partial withdrawals, only 1 in 3 are taking the maximum amount allowed.
Both of these levels are below what many insurers had expected, the consultants report.
If those GMWB trends continue, they could have a favorable effect on insurers’ reserve and capital levels, the consultants say.
“Guaranteed lifetime withdrawal benefits that provide lifetime income to the owner have been the most popular form of guarantee over the last few years,” Peter Gourley, a Ruark vice president, says in a comment on the study.
But, because the products are so new, the insurance industry has had relatively little experience to evaluate, Gourley says.
Use of the guaranteed minimum withdrawal benefit option offered with variable annuities has been lower than originally expected.Consultants at Ruark Consulting L.L.C., Simsbury, Conn., an actuarial consulting firm, come to that conclusion in a new study.
Ruark consultants analyzed 3 million policy years of experience data from 7 major VA issuers that was collected from January 2005 to June 2009.
When the consultants looked at owners whose annuities included a guaranteed lifetime withdrawal benefit, they found that only 1 in 5 are taking partial withdrawals. Among owners who are taking partial withdrawals, only 1 in 3 are taking the maximum amount allowed.
Both of these levels are below what many insurers had expected, the consultants report.
If those GMWB trends continue, they could have a favorable effect on insurers’ reserve and capital levels, the consultants say.
“Guaranteed lifetime withdrawal benefits that provide lifetime income to the owner have been the most popular form of guarantee over the last few years,” Peter Gourley, a Ruark vice president, says in a comment on the study.
But, because the products are so new, the insurance industry has had relatively little experience to evaluate, Gourley says.
