Desperately Seeking GLWBs On Fixed Annuities

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Since 2004, these benefits have practically become a requirement on the variable annuity (VA) sale. In fact, 84% of all VAs have opted for an optional GLWB1. Why? It is hard to guarantee a specified lifetime income amount on a product that has cash values which can rise and fall, based on the market’s performance. A GLWB can provide that guaranteed income, despite the ups and downs of the VA’s market-driven funds. Therefore, agents are quick to rely on this optional benefit for a “guaranteed” story on a product with no guaranteed cash values.

And while GLWBs were not offered on indexed annuities until two years after they were available on VAs, the indexed market has latched-on to these optional benefits eagerly. Evidence of this eager adoption can be seen in the fact that 66.5% of the sales of indexed annuities have owners that opted for purchasing a GLWB when available2. With the rising popularity of this annuity income feature, insurance companies have expended time, money, and energy into “beefing up” their GLWB offerings. Not sold yet? Consider:

  • Today, 72.3% of indexed annuities have a GLWB3
  • Some indexed annuities have as many as six different GLWBs to choose from3
  • You can opt for level or increasing payments under many companies’ GLWBs
  • Today’s GLWB may also offer ancillary benefits such as rollups, benefit base bonuses, guaranteed minimum death benefits, long term care-type features and more

So, what about the traditional fixed annuity? Why haven’t we seen the wildfire of GLWB popularity spread to the simple fixed annuity?

Two words: low sales.
As of 1Q2013, indexed annuity sales were nearly equal to traditional fixed annuity sales. That wasn’t always the case, however. In 2008, fixed annuity sales hit a whopping $82.2 billion1. Since that time, fixed interest rates have accelerated into a downward spiral.

The sad result of this decline in rates has been a corresponding plummet in sales. At the close of 2012, fixed annuity sales were a mere $38.0 billion1; a 54% drop from four years’ previous.
And because fixed annuity sales are now so low, fixed annuity product development has all but stopped in its tracks. For this reason, there are only three companies offering GLWBs on six different fixed annuities today; a stark contrast against the indexed annuity market.

It is really a shame. What I am hearing from consumers is that they want a product that can provide guaranteed income AND promise no risk to principal. Fixed annuities are the original principal protection annuity! Some prospects may not be comfortable with the 0% floor offered on indexed products; they want the guarantee of 1% (or more) interest, regardless of annuity performance. For these folks, Fixed annuities can be the perfect solution to their retirement needs.

Isn’t it conceivable that this demographic may want guaranteed income without annuitization?


Yet for now, only those three insurers can help these prospects.
A small glimmer of hope on the annuity horizon? July marked an increase in interest rates. No joke! Maybe the increases will continue, and there will soon be a drive for competition in the traditional fixed annuity with GLWB market…

…but, I wouldn’t hold your breath, just in case!


2 Wink’s Sales & Market Report, 1Q2013


Sheryl Moore is President and CEO of Moore Market Intelligence, an indexed product resources in Des Moines, Iowa. She has over a decade of experience working with indexed products and provides competitive intelligence, market research, product development, consulting services and insight to select financial services companies. She may be reached at

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