Rising interest rates are putting U.S. life insurers in a strong financial position — but clients are looking at news about inflation, U.S. politics and war in Europe and shivering.
The collision of insurer strength with client fear is shaping some of the ideas behind recent life, health and annuity issuer strategy announcements.
Here's a look at six top new strategy drivers.
1. Move toward offering registered index-linked annuities, or RILAs, with more protection against account value loss — and death.
Nationwide, an insurer, is updating the Nationwide Defined Protection Annuity contract, a product it developed with Annexus, an annuity designer.
The contract was the first registered index-linked annuity contract, or RILA, that Nationwide has offered, and now it offers new death benefit features.
A RILA is an annuity with a crediting rate tied to the performance of one or more ETFs or investment indexes.
Because a RILA is registered with the Securities and Exchange Commission as a variable annuity, the issuing insurer can expose the annuity buyer to the risk of loss of some or all principal. Some life insurers see using a RILA to adjust just how much investment risk they assume as a way to manage their own level of investment risk while, in many cases, offering the annuity buyers a chance to earn higher crediting rates in typical or good market conditions.
But Eric Henderson, president of Nationwide Annuity, part of Nationwide's Financial unit, said in a comment about the product that the effects of stock market volatility show that retirement savers need strong "floors," or limits on how far the value of their retirement investments can drop.
"We were very intentional in our decision to enter this category with an innovative solution that can help conservative to moderate investors balance the right level of protection they need with the greater growth potential they want," Henderson said.
The client pays for the contract with one big premium payment and can choose to protect 90%, 95% or 100% of that payment amount.
Now, Nationwide has further enhanced the level of protection the contract provides, by adding two new death benefit features, at no additional cost.
One is a return-of-premium death benefit feature. It guarantees that beneficiaries will receive at least the original premium invested in the annuity. Nationwide adds that feature automatically if the annuitant and the spouse, or other co-annuitant, are both 75 or younger when the application is signed.
The other new death benefit is a spousal protection feature, which protect both spouses and provides a death benefit on both of their lives.
2. Increase crediting rates.
Most U.S. life insurers are getting better returns on their own investments, and many are responding by increasing the rates they pay annuity holders.
One example is Oxford Life Insurance Co,, an issuer with an A- rating from AM Best.
Two years ago, it was paying just 2.35% on a five-year multi-year guaranteed annuity contract.
Now, it's paying a rate of 3.7%, according to annuity rate data services.
3. Cut some prices.
OneAmerica is adopting this strategy.
The insurer offers the Care Solutions life insurance policies, which combine rich long-term care benefits features with life insurance policies or annuity contracts.
