The insured retirement industry in 2013 could see a continuation of many of the trends and dynamics that marked 2012, according to a new report from the Insured Retirement Institute (IRI).
For 2013, IRI cited financially sound insurers, ongoing product innovation, and demographic factors driving consumer demand for retirement income, which should balance economic forces such as low interest rates.
“Many of the same forces that were factors this year appear to be here to stay for some time, particularly regarding demographics, and this will continue to affect consumer behavior,” said Cathy Weatherford, IRI president and CEO.
“Baby Boomers aren’t getting any younger, health costs aren’t shrinking, and defined benefit plans aren’t coming back any time soon,” she added.
Cathy Weatherford
Weatherford believes more consumers will confront the challenge of managing the risks that come with this new retirement paradigm. She says that market volatility and longevity risk — once not primary concerns for consumers — will influence consumer behavior.
“We are seeing this now as consumers are demanding guarantees and certainty, and insured retirement providers will continue to innovate and develop products to meet this ongoing need,” she said.
According to IRI, deferred income annuities, which saw their first year of significant sales in 2012, will experience new offerings and innovations. IRI predicts deferred income annuities will become “the fastest growing product in 2013″ on a percentage basis.
Within the variable annuity market, IRI expects many companies in 2013 to aggressively develop new products without living benefits to cater to consumers interested only in tax deferral or diversification. For fixed-indexed and single-premium immediate annuities, ongoing innovation has been taking place on the distribution side, with both expanding into non-traditional sales distribution channels.
From a public policy standpoint, the current “fiscal cliff” and debt ceiling negotiations remain the most immediate issue with potential to affect the insured retirement industry. With tax policy reform included in these discussions, any reduction or elimination of the tax-deferred status of annuities and retirement savings plans would have a negative impact on retirement savings and have vast repercussions for the industry, according to IRI. In a statement, IRI said that preservation of tax deferral should remain a priority.
On the regulatory front, IRI expects a long-awaited modified proposal from the Department of Labor’s Employee Benefits Security Administration in 2013. The proposal would change the circumstances under which a professional providing investment advice is considered a “fiduciary” under the Employee Retirement Income Security Act of 1974. Many in the insured retirement industry believe such a proposed rule would lead to increased costs and complexities, limit consumer choice and present a barrier to middle-income Americans seeking affordable retirement income services.
IRI, formerly National Association for Variable Annuities (NAVA), is recognized as a primary trade association for the annuity industry, representing all aspects of the distribution channel. Members of IRI include most major carriers, from Aegon, AIG and AXA to Guardian, John Hancock and MetLife.
Annuity industry could continue positive trends and dynamics into 2013 via IFAwebnews .
