IRI State of the Insured Retirement Industry: 2017 Review and 2018 Outlook

Posted on December 7, 2017

In its sixth annual State of the Insured Retirement Industry, the Insured Retirement Institute (IRI) reviews and analyzes the market environment, product development, annuity sales and distribution, and legal and regulatory developments that impacted the retirement income industry in 2017, and discusses potential trends in the coming year.

Among the report’s key findings, IRI notes product development and distribution are evolving in the wake of regulatory disruption, with product development focusing on fee-based products, and emerging product structures such as “buffer” annuities. The report also notes assets under management in annuities are at or near historic highs due to positive stock market returns, and within the various distributions channels shifts are occurring in product mixes as businesses adapt to the more onerous regulatory constraints resulting from the DOL fiduciary rule.

The State of the Industry also includes a review of IRI’s public policy agenda and focuses on the role it has played in influencing a variety of critical industry issues which have come before Congress and the Executive Branch. Some highlights of the work accomplished in moving the agenda forward include having conducted nearly 200 meetings with Members of Congress, producing research, and undertaking educational and advocacy campaigns, all of which contributed to helping achieve an 18-month implementation delay of the DOL’s fiduciary rule and the preservation of tax-deferred treatment of retirement savings and diversity of workplace retirement plans in tax reform.

Additionally, this year’s report looks at emerging trends among financial advisors. It explores how they are adapting to changes in products and processes, how they work with their clients, and how they view their roles and their value in helping clients save for retirement, create secure income, and navigate the many pitfalls that can derail the best of plans.

Trends in 2017

  • Fixed Indexed Annuities (FIA) and Investment-Oriented Variable Annuities (IOVA) are growing rapidly. FIAs continue to post strong sales as both a fixed income substitute – meaning a bond-like return without interest rate risk – and on the attractiveness of optional guaranteed lifetime income benefits.

  • Industry Consolidation, Streamlining, and Disruption: Exiting distribution, paring back product offerings or distributor relationships, and shifting product focus as companies digested the potential impact of the DOL fiduciary rule and adjusted their business models accordingly.

  • Growing Awareness of Retirement Issues: The 2017 report from IRI and Jackson, “The Language of Retirement 2017,” found that eight in 10 Americans do not believe that Social Security alone can provide them with sufficient retirement income. The same report found that only one in five expect a pension, implying there will be millions of people tapping their savings for income.

Looking Ahead to 2018

  • Buffer annuities will continue to grow in popularity: Blackrock research finds that 39 percent of retirement savers would move further away from their cash holdings if their capital were protected. As cash continues to be a non-performing asset, interest in products that offer upside potential and downside protection will increase.

  • Fee-based annuities will begin to gain traction: re-tooling processes to incorporate fee-based annuities into portfolio construction takes time, and training of advisors. As transaction processing improves and training takes hold, sales will grow.

  • Retirement risk management features will help drive VA sales: amid growing awareness of the need to protect assets from the devastating costs of a long-term care event, and the availability of underwritten long-term care insurance recedes, hybrid solutions offered through variable annuities will provide further value to retirees.

  • DOL Fiduciary Rule: potentially vacated by the 5th Circuit, or modified into a workable best interest standard during the 18-month implementation delay.

  • IRI Retirement Security Blueprint: IRI will continue to encourage Congress and/or the administration to enact and adopt common sense measures to increase access to lifetime income in retirement plans, help Americans to better prepare for a secure retirement, promote consumer choice and education, and reduce regulatory burdens for lifetime income options.

For the full report, please click here