A string of redesigned variable annuities are hitting the market, after life insurers last year yanked the products that proved too generous to customers and threatened some insurers' financial health. So writes Leslie Scism in the Wall Street Journal.
"Guarantees of lifetime payments were a major strain on insurers after the market slide of 2008 and 2009. Insurers quickly pulled the juiciest deals off the market–subbing in less-generous versions at higher prices.
"Now, they are rolling out fresh designs. The good news for consumers is that costs in the famously expensive products are edging down, and one of the new offerings has an interest-rate adjustment feature that will appeal to many baby boomers worried about inflation."
But in general, she notes, the new guarantees continue a trend in which insurers are trying to minimize their risk and consumer choice, by, say, requiring that buyers put 30% or more of their money into bond funds.
"The flurry of activity represents what consultants say is the start of a transformation of the variable-annuity business, as insurers try "to come up with a sustainable product that people want to buy" to help save for retirement and protect against a deep market downturn, said Ken Mungan, a practice leader at consulting firm Milliman Inc. "That means simple, low-cost, easy for people to understand," he said, predicting 'significant changes throughout 2010.'"
