As many in the life insurance and annuities industry turn their attentions toward the coming year, it might be of particular interest to see how the latter type of offering will be affected by consumers' changing attitudes toward what they can afford to save for their futures.
According to a report from Life Health Pro, in many ways, annuities are becoming the most attractive of products generally offered by life insurance issuers, and now it seems likely that they'll continue on this path for at least the next 12 months. There is certainly no guarantee in this regard, and companies will have to keep a close eye on the market to determine how they should approach it, but it's likely that either or both of fixed and variable annuities could continue to become more popular among consumers.
It's important to note that a new type of annuity, which does not guarantee living benefits to holders, has become somewhat successful when marketed to investors as long-term, tax-deferred savings tools, the report said. These no-guarantee variable annuities could continue to pick up steam and serve as a boon to insurers still struggling in the low interest rate environment.
Rule changes could weigh heavily
The report also noted it might not all be good news for those involved with annuities in the coming year, though, as those operating in a number of states may become increasingly burdened by greater restrictions from regulators. This is especially true because of the ways in which private equity firms have scooped up annuities issuers in the last few years, and have been specifically targeted by regulatory bodies for reforms with regard to the reserves they carry.
This, too, may be impacted by the ways in which interest rates move over the course of 2014. The Federal Reserve Board's Federal Open Market Committee recently said it would begin tapering its bond purchases in the new year, but reaffirmed that it would do so in such a way that keeps rates low for some time to come. Just how low obviously remains to be seen, though.
Companies may want to better insulate themselves from these potential issues by trying to find a wider customer base. One way in which this might be possible is by offering an expanded array of products that might serve to more directly appeal to people in a larger number of personal financial positions.