Advisers Reflect on How the Annuity Sales Process Could Be Improved

The Secure Retirement Institute (SRI) recently published a short analysis that compiles financial advisers’ views on the annuity sales process—particularly how it could be made simpler and more straightforward.

According to SRI researchers, the COVID-19 pandemic resulted in “rapid and unprecedented changes” in the annuity industry, as it did across financial services sectors. Many longstanding business practices quickly changed as the industry went remote, SRI says, and it is likely that the changes adopted in 2020 will continue as the new normal for the industry.

Adding to the inherent complexity of the annuity sales process and the influence of the pandemic, various states are reforming their rules and requirements pertaining to the sale and service of annuity products within their borders. At this point, more than a dozen states have adopted enhanced consumer protections for purchasers of annuities based on a best-interest framework put forward by the National Association of Insurance Commissioners (NAIC). Simultaneously, some more progressive states such as New York have created their own unique—and many say far stricter—annuity sales frameworks, and the U.S. Congress is also getting involved. In June, a trio of lawmakers reintroduced the Registration for Index Linked Annuities Act, a piece of legislation that supporters say will lower barriers to the launch of innovative retirement income products.

The SRI’s data reflects this evolving environment. Compared with other investments, advisers say selling insurance products such as annuities often requires a more extensive process. More than six in 10 advisers, however, describe the annuity sales process, from initial client discussions through transactions, to be “very easy” or “easy.”

“While there were no clear differences in the assessment of the sales process across channel, more experienced advisers were more likely than less experienced advisers to consider the process to be easy,” the analysis explains.

According to the SRI, nearly 70% of advisers with 20 or more years of experience report the annuity sales process as being easy or very easy, compared with 58% of those with two to four years of experience. When asked why advisers found the process difficult, the top reasons given were that the annuity product designs are too complex (63%), that the process requires extra sign-offs and supervision compared with other products (63%), and that there’s a variation in procedures across carriers (32%).

The SRI data shows the top recommendations from advisers to insurance carriers all involved simplification and efficiency. Advisers broadly encourage annuity manufacturers to make their designs less complex; to move toward greater use of technology and reduce paper-based processes; and to limit variation in procedures across carriers.