MQATMULY

January 4, 2023 by Sheryl J. Moore

I was really excited to learn about a new index recently, which is designed to show you what a typical renewal annual point-to-point participation rate should be in the present environment.

Mark Waldman schooled me about this new index from Genesis Financial Products, the company that brought us the indexed annuity.

My mind began racing…of all the applications for such an index, I was most excited about the prospect of using this new index to gauge indexed annuity renewal rate integrity!

As you are well aware, it is practically standard industry practice for indexed annuities sold through independent agents to have inforce renewal rates that are lower than the new business rates. Often, insurance companies use inflated first-year rates as “shiny bright objects” to get agents’ attention, to sell their products. Then, in years two plus, the rates are reduced.

However, the insurance company does have to go out, and buy new options every year for annual reset strategies. If options are more expensive at this time, this could also cause a reduction in rates. So, how do we trust that the inforce renewal rate is affected only by these market conditions, and not by bait-and-switch?

I’m certain you can imagine how excited I was to hear about this index! I am curious to see which insurance company will be the first to add it to it’s indexed insurance offering?!?

Check it out- the ticker symbol is MQATMULY.

Let’s just assume the index level was 8% as of Tuesday, 12/20/21. We’ll also assume it was at 16% one year later on 12/20/22.

So, if an indexed annuity had a participation rate of 25% on 12/20/21, then the renewal participation rate on the annuity SHOULD BE 12.5% on 12/20/22. (25% x (8%/16% = 12.5%)

My mind is BLOWN! We have needed something like this for a long time. Tell me what you think!