Wednesday, March 25, 2009

Unusual industry conditions create challenges, avenues for growth

2009 is shaping up to be one of the most unusual years in the fixed annuity industry, ever. In most years, insurance companies welcome increases in sales of their insurance products. In fact, insurance companies employ and incent sales personnel and independent insurance agencies in order to increase sales. But a combination of unprecedented financial constraints and soaring sales volume has forced many carriers to take unusual actions to limit incoming sales volume.

It is not unusual to see insurance companies cut compensation or interest rates. But so far this year, we have seen some of these carriers eliminate popular products, terminate productive agent forces, eliminate the contracting of new agents, or even stop all new sales altogether. Why is this?

One constraint is the soaring popularity of fixed annuity products, particularly multi-year guaranteed annuities. Some carriers have seen monthly sales volumes in excess of their typical yearly annuity sales volume. The desire of financial consumers and retirees to find a safe place to put their money while still realizing a respectable return has led them to beat a path to fixed annuities.

At the same time, declining interest rates, high bond defaults, high stock market volatility, and the lack of availability of new capital has severely constrained the ability of these insurance companies to profitably write new business.

To respond, insurance professionals are going to need to be more flexible than usual, moving their new business volume from carrier to carrier as the availability of products dries up. These insurance agents are also going to need to work harder to service their business. Some insurance carriers are so swamped with service business that they cannot effectively process rollover business. Thus, insurance agents would be wise to work with their clients to obtain rollover checks rather than relying on carriers to do the work.

Savvy financial advisors will be able to take advantage of these conditions to grow their businesses dramatically. There never has been a better time to advertise fixed annuities to potential clients and the general public as now.

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