It Was A Year Of Dichotomies In The Index Annuity Market

–Reduce premium bonuses: 7 companies.

–Reduce commissions: 7 companies (twice for two companies and three times for a third company).

–Terminate agents: 2 companies.

–Stop all new agent appointments: 4 companies.

–Stop accepting 1035 business temporarily: 2 companies.

–Stop accepting all business temporarily: 2 companies.

Concerning sales, many predicted that the SEC's 2011 implementation date for Rule 151A spurred the record sales in 2009. Some speculated that distribution would rush to get as much business issued prior to the 2011 deadline as possible. However, the sales surge was a direct result of something else–the failing economy.

When the economy took a nosedive, consumers panicked and began to look for "safe money places" for their retirement dollars. Those who had lost money in the market, mutual funds, or variable annuities were suddenly looking to fixed annuities and IAs for their retirement solutions.

The result was record-setting IA sales– an all-time high of nearly $8.5 billion in second quarter, and just over $23 billion year-to-date as of third quarter. Projected sales for the year are near a record high of $30 billion. Quite simply, 2009 was a great time for IA sales.

On the other hand, it was hard for insurers to offer annuities in the capital crunch. For the first time, there was a mismatch between supply and demand of annuities. Some companies responded by intentionally reducing sales by nearly 70%.

When the dust settled, there was a new top carrier in the IA market and the former king had fallen to fifth place in terms of sales. There were many shake-ups in the rankings of the top 10 companies, including one company that advanced to the top 10 in third quarter 2009 from 29^th place in 2008.

Concerning distribution, it has never been more difficult to be an independent agent in the insurance market.

IA agents were particularly challenged with the impending 151A. Will they need to become registered reps if IAs become securities? To what product(s) could they divert their sales in lieu of IAs? They also were concerned about how product changes would affect their business. Will insurers with which they are contracted limit the amount of IAs they can sell? Will their favorite product still be available for sale tomorrow?

By year-end, consumers still wanted a "safe money place" for their retirement dollars. Neither regulation nor product pricing hindered their need for IAs.

Sheryl Moore is president and chief executive officer of AnnuitySpecs.com and LifeSpecs.com, an indexed product resource in Des Moines, Iowa. Her e-mail address is [email protected].