IRI Reports 3Q VA Product Changes Slow, Benefits Trending More Generous

November 22, 2011


Lifetime GMWB Benefits Garner More Than 60% of New Sales Flows

WASHINGTON, D.C. – The Insured Retirement Institute (IRI) today released a report on product trend updates within the U.S. variable annuity market. Compiled by Morningstar, the report found that variable annuity benefit activity for the third quarter slowed significantly from the robust filings made during the second quarter of this year. In the third quarter, carriers made 40 material changes, down from 162 changes in the second quarter, and down from 106 changes in the same quarter last year.  The new filings focus heavily on new share classes and the Lifetime Guaranteed Minimum Withdrawal Benefit (GMWB) benefit, which traditionally garner about 64 percent of new sales flows.

“Second quarter filings are historically the highest of the year, with third quarter changes representing one of the slowest periods of activity, and this year is no exception,” said IRI President and CEO Cathy Weatherford.  “What has not slowed is the continued move toward increasingly generous benefits, a trend that developed in the months that followed the economic downturn and remains a focus of product development activity today.  With variable annuity sales on pace to exceed $150 billion this year, it is clear that consumers are positively responding to the product innovation that has occurred by increasingly placing their trust in insured retirement strategies.”

Despite the anticipated slowing of third quarter changes, more than one-third of the filings represented either a new variable annuity contract or a new variable annuity benefit.  Carriers continue to experiment with new benefit design, with the trend toward more generous offerings.  Benefit structures continued to be shaped to allow for risk control and segmentation of the target investor base.  Contrary to the continued move to more robust benefits, variable annuity contract costs have remained steady.  Total average expenses remain unchanged from 2010 levels, coming in at 2.49 percent, a figure that is consistent with the five-year average of also 2.49 percent.

The entire report and analysis can be found here.

About the Insured Retirement Institute

The Insured Retirement Institute (IRI) is a not-for-profit organization that for twenty years has been a mainstay of service, commitment and collaboration within the insured retirement industry.  Today, IRI is considered to be the authoritative source of all things pertaining to annuities, insured retirement strategies and retirement planning. IRI proudly leads a national consumer education coalition of nearly twenty organizations and is the only association that represents the entire supply chain of insured retirement strategies: our members are the major insurers, asset managers, broker dealers and more than 75,000 financial professionals. IRI exists to vigorously promote consumer confidence in the value and viability of insured retirement strategies, bringing together the interests of the industry, financial advisors and consumers under one umbrella. IRI’s mission is to: encourage industry adherence to highest ethical principles; promote better understanding of the insured retirement value proposition; develop and promote best practice standards to improve value delivery; and to advocate before public policy makers on critical issues affecting insured retirement strategies and the consumers that rely on their guarantees. Visit today to experience the vast resources of the Insured Retirement Institute for yourself.


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