New group aims to improve negative view of annuities

Two dozen insurance companies and mutual fund firms form The Alliance for Lifetime Income to reframe perceptions and boost product awareness

Aug 23, 2018 @ 2:22 pm

By Greg Iacurci

A new group is trying to reframe how advisers, their clients and the broader public view annuity products.

Two dozen insurance companies and mutual fund firms coalesced to form The Alliance for Lifetime Income, seeking to bolster an industry that has suffered negative perceptions due to product complexity and expense, and seemingly persistent news about consumers scams.

"Language around the products has been far too confusing in the past," said Colin Devine, educational adviser for the Alliance. "We need plain, simple language that an individual can understand and an adviser can understand."

CANNEX Financial Exchanges Limited conducted a survey this year that found consumer interest in a guaranteed lifetime income product fell by a third when the word "annuity" was used to describe the same product.

"The word 'annuity' is anathema," said Tamiko Toland, head of annuity research at CANNEX. "You drop the word and people say, 'Oh, those things are a rip-off.' They don't let you get to the second sentence."

The Alliance for Lifetime Income, which launched in June, is in the midst of an advertising and marketing blitz to provide a facelift to annuities, raise product awareness and improve product education.

The group's executive director, Jean Statler, is co-founder of the marketing firm Statler Nagle. She's a veteran of counseling a few ailing industries. Her website, for example, says that as a former vice president for communications at the American Plastics Council, Ms. Statler was architect of the "Plastics Make It Possible" campaign, which she touts as "one of the first industry campaigns to both change consumer behavior and inoculate an industry against legislative threats."

Despite a slight uptick in variable annuity sales in the second quarter, the industry had seen sales decline in the prior 17 consecutive quarters. The Insured Retirement Institute, a trade association representing the insurance industry, said in its latest annual report that VAs have seen a "significant drop" in sales among products offering lifetime withdrawal benefits, which used to be the "juggernaut" of the industry. Despite this, VAs are still the most sold of any annuity type.

Nine of the Alliance's 15 insurer members — American International Group, AXA Equitable Life Insurance Co., Brighthouse Financial, Jackson National Life Insurance Co., Nationwide, Pacific Life Insurance Co., Prudential Financial Inc., TIAA and Transamerica Life Insurance Co. — were among the top 11 largest VA sellers through the second quarter this year. Some insurer members are also among the largest sellers of fixed annuities.

Mutual fund companies such as Capital Group, Franklin Templeton Investments, Goldman Sachs Asset Management, Invesco, JPMorgan Asset Management, State Street Global Advisors and T. Rowe Price manage variable-annuity sub-accounts.

The Alliance started a print, digital and radio advertising campaign two months ago, and will use broadcast television advertising slots this fall. The group declined to specify its budget. The ads are in addition to a consumer- and adviser-facing website offering educational materials and personal stories around annuity use.

Part of the group's mission is to better understand why some brokers don't sell annuities, said Mr. Devine, a former analyst at Salomon Smith Barney, where he provided equity research coverage on North American life insurers. The group has a purely educational component and will not lobby on the industry's behalf, he said.

The Alliance is the newest addition to a full roster of insurance trade groups, including: IRI, the American Council of Life Insurers, Limra Inc., the National Association of Insurance and Financial Advisors, the National Association for Fixed Annuities, the National Association of Independent Life Brokerage Agencies and the Society for Annuity Facts and Education.

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