Elements that Distinguish Prosperous Living from the Annihilation Industries

The insurance and annuity industries face challenges such as high interest rates, data generation, and ignorance about annuities, but they can leverage these opportunities for long-term growth.

FREMONT, CA: The uncertain economic environment has led to consumers reevaluating various expenses, including insurance and investments. As more financial services are transacted online, it has become easier to switch providers, putting pressure on the insurance and annuity industries to constantly find new revenue generation and retention opportunities. To ensure a banner year, insurers must focus on process streamlining, data integration and personalization, education and building trust, fixed annuities becoming more attractive, modernizing legacy product operating models, and addressing defined benefits.

Process streamlining involves reducing the time to issue life insurance policies, transitioning from legacy systems to rules-based applications, and creating simpler products that lend themselves to simplified issue processing. Insurance companies also work to eliminate costly manual underwriting, issuing policies within minutes rather than days.

Data integration and personalization involve leveraging available information through third-party partnerships, such as integrating medical information from other companies or incorporating data from an insured's wearable fitness tracker for continued risk monitoring. Education and building trust are crucial for life and annuity companies to educate unserved consumers and overcome cynicism.

Fixed annuities have become more attractive since the S&P entered a bear market in June 2022, with high-interest rates making fixed and fixed-index annuities particularly appealing. LIMRA predicts fixed immediate annuity sales will increase through 2026, but this growth could cannibalize variable annuity sales, especially if the market experiences a steep decline.

Modernizing legacy product operating models can be costly. Still, it offers key benefits such as reduced maintenance costs, greater flexibility in staffing, speed to market for new products, and a standardized interface for distributors.

Defined benefits make a comeback, as by 2030, nearly 20% of the US population will be over age 65. Younger investors are demanding safer alternatives and are aligning with more conservative strategies. The SECURE 2.0 Act of 2022 implements measures to protect retirement income, such as increased Quality Longevity Annuity Contracts (QLAC) accessibility in defined contribution plans, increased plan access, employer contributions for student loan payments, and liberalized distribution rules. These rule changes create opportunities for life and annuity companies to engage with an otherwise ineligible market segment, increase sales and assets under management, and increase profitability per customer. However, the challenge lies in getting existing plans compliant with new rules, updating policies and procedures, training staff, and revising prospectuses, statements, and forms.