Catering to a growing need for innovative annuity products, life insurance company Great American Life became the second insurance carrier to be incorporated to SIMON’s insurtech annuities platform for wealth managers, in January of this year.
The partnership follows Great American’s collaboration with Raymond James in mid-2019, which birthed the only annuity on the market that offers crediting strategies with both upside and downside participation rates.
SRP spoke to Joe Maringer (pictured), senior vice president at Great American Life, about the firm’s approach to the evolution of the annuities market, attitudes towards multi-dealer platforms, and the firm’s market outlook.
How has Great American approached the evolution of the annuity space?
Joe Maringer: Great American has offered fixed indexed annuities [FIAs] for over 20 years, and as products and markets continue to develop, we too have looked to see how we can continuously offer relevant, transparent and leading products in the annuity space. Fortunately, our parent company, American Financial Group, a Fortune 500 organisation, continuously supports the vision and strategy to grow and enhance our product offering. In fact, since 2018, we have launched three structured/registered index linked annuities that offer greater earning potential than traditional FIAs and provide some protection from market loss.
SIMON was a natural fit to display our core annuity product features across all annuity lines of business
When we looked at the structured product marketplace, we saw an opportunity to offer an annuity with a unique combination of upside potential and downside protection, much like a structured note, but with the added benefit of tax deferral. Enter the Index Summit 6, a registered index linked annuity that we developed in collaboration with Raymond James.
The Index Summit 6 is offered through financial institutions, banks and independent broker-dealers, and is the only annuity on the market to offer crediting strategies with both upside and downside participation rates. This, coupled with its growth potential and protection factor, can make the product an attractive investment vehicle for growth-focused clients seeking to mitigate market volatility.
Since the Index Summit 6 is closely aligned with the structured product marketplace, SIMON was a natural fit to display our core annuity product features across all annuity lines of business. SIMON has a robust platform that has been distributing structured notes and certificates of deposit. For us, it’s a great opportunity to distribute our solutions and ultimately to achieve our core brand value, which is to create a simple experience for the advisor and client.
Why do you feel registered index-linked annuities have gained momentum over the last two years?
Joe Maringer: Registered index-linked annuities [RILAs] and FIAs are often a good fit for those nearing or in retirement, which is a large part, if not the largest part, of the population. The proposition of principal protection and the potential for higher growth opportunity than other safe money instruments is very appealing for this group of people. RILAs and FIAs can be an attractive alternative to products offering a fixed interest rate, which are not delivering enough if you take into account volatility and the number of years until retirement.
People nearing or in retirement cannot go through a 2002 or 2008 scenario where potentially 50% of their nest egg could be lost. Investors understand that in order to provide some protection, they will give up a little of the upside potential, but when coupled with tax deferral and lifetime income options, RILAs are a very valuable alternative to that consumer base that is ever growing.
Multi-dealer platforms also help expose annuities to more advisors who have possibly avoided annuities
One thing we do at Great American is always look for simple solutions. We have actually trademarked the phrase “it pays to keep things simple”. To live up to this brand promise, our RILAs have no fees, no contract charges, and no mortality, expense and administrative (ME&A) charges. We think the simplicity helps with the positioning of these products within our client base.
Do you think there is a need to clarify the nomenclature, the naming conventions around indexed annuities? What would you say to the end investor is the difference between RILAs and FIAs?
Joe Maringer: What we call RILAs, some others call buffered annuities, index variable annuities or variable indexed annuities. We are seeing different naming conventions in a market place that is growing in size and sales volume (US$16 billion), where just a few years ago were single digits. We think an industry standard would benefit the market and avoid confusion among end clients. We do not sell to the end client but we work very closely with our distribution partners (banks, broker dealers, and investment advisory firms). We decided to proceed with RILA because it is the name accepted by trade organisations such as LIMRA. We take the ‘fixed’ moniker as an indication that the product has capital protection and ‘registered’ as an indication that some of the principal is at risk.
What’s your take on multi-dealer platforms?
Joe Maringer: We think multi-dealer platforms will help to increase the reach of our products. One of the challenges to grow the annuities market is the highly-regulated path to purchase. SIMON, for example, can take the training element, the financial planning, the path to purchase and the lifecycle management of the contract and package that into one streamlined process, which is in perfect alignment with our goal to keep things simple.
Multi-dealer platforms also help expose annuities to more advisors who have possibly avoided annuities because the process to purchase these relative to other financial instruments has been a challenge. That is one of the core reasons we want to engage with platforms and exchanges, they can help make the path to purchase more seamless. We believe insurance products should be part of the overall portfolio, as they can help with and provide a better overall solution when a portion is allocated into insurance.
Are you considering any other US platforms?
Joe Maringer: We are open to joining other platforms. SIMON is already working with some of our core distributors, so it made a lot of sense for us to seize on the opportunity. I would also anticipate we are going to see firms like the Envestnet Insurance Exchange and others, building and rolling out new insurance technology to get annuities more integrated with the entire portfolio.
Are there any concerns around the regulatory framework?
Joe Maringer: One thing that we are concerned about is individual states implementing their own specific regulation. Great American, by choice, does not offer annuities in New York, but we are seeing a regulation standard being promulgated by more individual states. We foresee this as a challenge not only for distributors (broker-dealers, banks) but also for carriers to manage. The last thing we want is to limit the best solution in those respective states because of certain differences that make it too hard for distributors to operate there. We are keeping a very close eye and are providing comment through trade organisations, and in some cases, directly to state regulators. Overall, as you can imagine, we want to make sure that there is a standard to protect the best interest for the end consumer, but its execution has to be in a manner in which we do not disadvantage the consumer and we can get these products and solutions into their portfolios to create a better result for them.
What is your outlook for this year, at a market level and at a firm level?
Joe Maringer: Before we look forward, we need to look back. Last year was dominated by the low interest rate environment, which we did not anticipate. We expect the tight environment will remain.
The overall atmosphere remains relatively strong from an equity perspective - balance sheets continue to be strong. We would suspect that for insurance, both FIAs and RILAs continue to see growth as we expand the awareness around these solutions by getting access to platforms and exchanges, like SIMON, which can bring this product set to people that haven’t seen them before.
We are definitely optimistic for 2020, and could argue that these solutions work well and can be very beneficial to the end consumer when the market goes up but also when the market does correct. We will continue to offer clean, simple and transparent products and leverage on the existing technology to increase the reach and distribution of these solutions.