New York Life Insurance Co. expects to release its first longevity insurance product this July, according to Chris Blunt, executive vice president of its retirement income security unit.
“This deferred-income annuity could be longevity insurance at the extreme,” he said. “It allows us to take the concept to a younger segment.”
Longevity insurance is essentially a deferred-income annuity that provides a steady payout at a later date. The end goal is to provide clients with a stream of guaranteed income that will last longer than they do; the product can act as a backstop to a systematic-withdrawal plan.
A number of major insurers, including MetLife Inc., already have products on the market. New York Life previously offered a longevity product that required the customer to pay a fixed premium for 10 years before collecting income, but it didn't gain traction, Mr. Blunt said.
The insurer will target clients in their 50s who are thinking of retirement income but aren't necessarily prepared to annuitize now.
“There will be some hard-core planners that will think it makes sense,” Mr. Blunt said. “The market for this product is people who are three to seven years from retirement.”
Although income annuities seem to be enjoying a tail wind now — sales across the industry reached $8 billion last year, up 2% from the 2010, according to Beacon Research Publications Inc. — there are still some hurdles for New York Life to overcome, said Judith Alexander, director of sales and marketing at Beacon Research.
Those obstacles include the difficulty of getting clients to understand the benefit of parting with some of their money now for a guaranteed income stream later.
“It's a big hurdle to hand over this chunk of money and know you're not going to see any benefit for a long time,” Ms. Alexander said.
However, New York Life might be coming into the market at a time when there is pent-up demand for longevity insurance from prospective buyers who thought that they would wait out low interest rates.
“I suspect there are a lot of people who said, "Let's wait until rates rise,'” Ms. Alexander said.
E-mail Darla Mercado at [email protected].
