The Future of Annuities

Can annuities be commoditized? After all, robo-advisers are reducing the human interaction in money management. Are annuities easier to buy than the S&P 500? Some industry prognosticators say it’s in the cards. Will technology and commodity design deal insurance agents out of the market? Will you be able to buy a lifetime annuity on a web site like purchasing an airplane ticket? We may very well be within five years of online transactional annuities.

Several years ago the industry attempted to bypass the sales field force by selling life insurance direct online and on kiosks in shopping malls, even at Walmart. With a few exceptions, the strategy proved unsuccessful for most companies. But annuities are not the same as life insurance. Guaranteed fixed rate and lifetime income annuities are easy to understand. For consumers, it will come down to buying the best interest rate or payout rates posted online.

When consumers can shop for themselves, the Department of Labor won’t need to intervene in the market place to regulate the industry from the poor practices of a few bad apples in the sales force. If this shift actually occurs, the annuity distribution cost will decrease and the annuity interest and payout rates will increase. That’s good news for consumers. But until then, consumers will continue to look for honest advisers who put their client’s interest first and not themselves.