Why Consumers Resist Annuity Swaps Even as Old Rates Worsen
March 8, 2023 by Cyril Tuohy
The case to turn in their old products seems compelling: Investment yields have jumped a lot over the past year. Also, rates on their existing products have sunk to the near-minimum levels allowed, said Sheryl Moore, CEO of Wink, publisher of Wink’s Sales & Market Report.
Click HERE to read the full story via Life Annuity Specialist
Wink’s Note: My dear friend Christopher Conroy at Insurance Agency Marketing Services, Inc. provided some poignant quotes for a Life Annuity Specialist article that Cyril Tuohy wrote.
(Warning: while it is out this morning, you have to get past a paywall to see it.)
At any rate, Conroy touches on a subject that we have been discussing over the past week or so.
**Annuitants are being handcuffed to some indexed annuities**
He says, “There are some [indexed annuity] policies with very low renewal rates declared and are just halfway through a 10- to 16-year surrender charge period who may still have 10-16% of surrender charge remaining.”
***The minimum caps on most new indexed annuities are less than 1% today, as a point-of-reference.***
He goes on to suggest, “Even if they [the producers] wanted to move to a better annuity with today’s much higher prevailing rates, almost no carrier’s suitability teams would consider such an exchange as being suitable for the client because of the regulatory scrutiny of perceived ‘high’ surrender charges or years remaining.”
>>How can you avoid your clients being in a similar situation?<<
Above all things- DO YOUR DUE DILIGENCE ON THE INSURANCE COMPANY!
Talk to peers! Does the company have a history of reducing inforce renewal rates? What have other producers’ experience been with their inforce clients?
And for goodness’ sake- check out the minimum guarantees in the contract!
Lastly- I would be taken to the curb if I didn’t mention…consider carefully the costs and benefits of long/high surrender charge annuity products. There aren’t a TON of annuities with surrender charges beyond ten years or up to double-digits anymore, but you would hate for your clients to be stuck in a 15+-year product with a maximum earning potential of 2%.
-sjm
