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Although fixed index annuitiesalso known as equity index annuitiesset new sales records in 2001, the product development front revealed design tweaking rather than bold innovation.
This may change in the coming year, however. Well discuss why momentarily. First, the current situation:
Uncertainty over the timing and direction of the stock market, in combination with falling portfolio yields and volatile option prices, led carriers to take a "wait and see" position.
New product introductions were lower than any previous year, according to our latest tracking information.
The most significant development was the increasing use of index annuities with an initial premium bonus of 5% or more. Over the last year the market share of products with first-year premium bonuses of 5% or greater rose from 7% to almost 25% of index annuities sold. (See Chart 1.)
The commissions on new products continued rising. The average index annuity commission received by an agent represented 10.60% of premium. Average weighted commission paid by carriers ranged from 3.37% to 14.19% of premium collected. (See Chart 2.)
At this point, the product talk coming from these calls centers around products that have simple crediting methods, short surrender periods, and low commissions–the very opposite of recent trends.
