IRI and Cerulli Associates found that 35% of households were unfamiliar with annuities in 2009; 29% had no opinion of them. Other opinions included: 13% said annuities are too confusing/complex; 12% cited the expense of the product, 10% said they are good way to protect assets; 8% believed the insurance companies selling annuities are untrustworthy; 8% also believed annuities are a good way to generate income; and 7.5% said weak balance sheets will prevent insurance companies from fulfilling their contracts.
As investors are still relatively unsure about annuities, the survey found insurance companies’ greatest challenge is attracting new advisers to their products (28%). Communicating complex benefits riders was the next greatest challenge (25%), followed by differentiating products in a crowded marketplace (23%). Dealing with negative press coverage or negative perceptions of the insurance industry were viewed as far less of a challenge, with only 5% saying each was their greatest challenge.
By “increasing the awareness of the overall value proposition annuities can offer,” the insurance industry will see more advisers and investors begin to accept the place annuities have in a diversified portfolio, said Cathy Weatherford, President and CEO of the Insured Retirement Institute (IRI), in a news release.
The survey also found that most advisers (67%) decide to place their clients’ assets into an annuity to serve as retirement income. Fifty-eight percent use annuities as a method of principal protection, and 37% go with annuities for its tax deferral benefits.
The most effective methods for insurers to use to gain interest of advisers new to annuity business is to demonstrate how annuities can supplement portfolios (75%) and to provide training tools to show the value of annuities (75%), IRI and Cerulli concluded.