Hybrid Annuities Tempt Baby Boomers

It was a banner year for annuities in 2006 with a record $236 million in sales. Competition is expected to intensify in 2007 as many of the top 10 U.S. life and annuity companies release new hybrid annuity products with lifetime benefit guarantees and more flexible payout options.

With baby boomers retiring at a rate of 8,000 a day, these top carriers are providing a valuable product that has been quickly embraced by their clients. One of the first companies to introduce a hybrid wealth management product is already reporting that half of all annuities are now sold with an income-for-life benefit.

Twenty years from now, 44 percent of the U.S. population will be age 50 or older. This market segment has an ever-increasing need for financial stability that cannot be satisfied through investments and housing values alone. Only insurers can offer income guarantees combined with liquidity access that today’s consumers demand, but few are prepared to serve this market.

“Frankly most companies don’t have the systems to support these new products,” said Michael W. Risley, president of CSC’s Life and Annuity Division. “Insurers have traditionally kept asset accumulation separate from asset distribution, but today’s consumers demand both in a single product. The leading companies have already launched these products and other insurers will be forced to follow in the next few years.”

CSC is meeting this need with its Wealth Management Accelerator™ software. It manages both asset accumulation and distribution in one contract and simplifies the process of designing products and introducing producer incentives.

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