Here is an enthusiastic farewell to the annuity business of 2009 and a warm welcome to 2010.
From a business, financial, and economic standpoint, 2009 did not offer many bright spots. Annuity carriers responded to economy-related pressures by trimming expenses and staff, reducing the richness of product features, stepping up risk management, and increasing product and rider fees. Product innovation all but disappeared, and producers flocked to annuities with "bells and whistles" such as guaranteed minimum withdrawal benefits, guaranteed minimum income benefits, step ups, roll ups, and tiered income. 
The key questions to ask now are: Will producers give annuities their utmost attention now that the features and benefits have changed? Will customers continue to value tepid guarantees, given the cost comparison to mutual funds and other investment products? How can the industry differentiate its products now that other products are getting into the income game?
Fortunately, where there is chaos and destruction, there is always opportunity. Perhaps now that companies appear to be getting back to basics, the annuity industry can address some of its critical issues and uncover that opportunity.
Can, for instance, the industry build an annuity product that is simple and cost-effective, that offers diverse investment options and that also provides for guaranteed lifetime income? Can these new generation products effectively compete with other retirement investment vehicles, such as mutual funds, managed accounts, and individual retirement accounts?
Studies have shown that retirees have two fundamental concerns: How much money will I need to retire, and how can I make sure I do not run out of money?
But now awareness is growing about a third major concern: What happens if I get sick and who will take care of me? The recent health care and Medicare discussions have only added to this worry. The public is being told that a retiree can expect to spend around $250,000 for health care expenses alone and more if a catastrophic long term care event happens.
Can annuities address this new retiree concern, too?
The federal government recognizes the need and has already enacted legislation that enables annuities to respond.
The Pension Protection Act of 2006 provides tax incentives for individuals who purchase combination annuity/long term care products. It allows for the withdrawal of annuity proceeds, income tax-free, to pay for long term care expenses. Effective January 1, 2010, this applies to new combination annuity contracts as well as older contracts that are exchanged into new combination annuities with long term care. 
