New Study Examines Fixed Indexed Annuity Contract Owner Behavior

Society of Actuaries Research Institute and LIMRA Release Latest Experience Studies Pro Report

WINDSOR, Conn., and SCHAUMBURG, Ill., Aug. 16, 2023 – A new study finds that in 2019 and 2020 owners of a fixed indexed annuity (FIA) with a guaranteed lifetime withdrawal benefit (GLWB) were less likely to surrender their contracts than those without a GLWB.

The Fixed Indexed Annuity Contract Owner Behavior Study, conducted jointly by LIMRA and the Society of Actuaries (SOA) Research Institute, provides detailed analysis, updates industry benchmark data and examines trends in GLWB rider use. This study is part of the Experience Studies Pro research series.

Surrender rates tend to be the highest in the year that the contract funds can be withdrawn without a surrender penalty. The study shows just a 10% surrender rate in the year the surrender charge expires for contracts with a GLWB rider. In comparison, the surrender rate in the year the surrender charge expires was 33% for FIA contract owners without a GLWB rider.

“The ultra-low interest rates and equity market volatility brought on by the COVID-19 pandemic may have led owners with no remaining surrender charge to recognize the value of their guaranteed income benefit,” said Marianne Purushotham, corporate vice president, head of LIMRA Research Data Services. “Given the dramatic economic shifts over the past few years, we developed this study to provide in-depth, up-to-date insights on today’s market. The study’s results enable insurers to align their product development and a principles-based reserving structure with the latest experience data and industry benchmarks.”

LIMRA and the SOA Research Institute collaborated to collect, validate and summarize the data for this report from 20 individual companies writing FIA products, representing just over 60% of the U.S. market. The Experience Studies Pro series leverages LIMRA’s powerful data analytic capabilities and the SOA Research Institute’s historical expertise in studying experience data.

“This new study is one of several projects developed together with LIMRA to provide deeper insights and analysis on FIA contract owner behavior, including the ability to look at the impact of distribution channels and product and rider features,” said R. Dale Hall, FSA, MAAA, CERA, CFA, managing director of research for the SOA Research Institute.

Other findings from the study include:

Withdrawals are higher for FIAs with GLWB riders: For FIA contracts with a GLWB rider, 37% took withdrawals in 2019 and 2020. Fewer than 30% of contracts without GLWB riders initiated withdrawals.
Premium deposits are higher for FIA contracts without GLWB riders: On average, for the current study period, 2.5% of total FIA contracts made premium deposits in contract years 2 through 10. The percentage was higher (3.3%) for contracts without a GLWB rider than for contracts with a GLWB rider (1.9%).

In addition to the summary report — available to the public — a detailed data research package is available for purchase, which includes tableau dashboards that provide alternate breakdowns of results and the ability to view information of particular interest to the individual user. To purchase the Fixed Indexed Annuity Contract Owner Behavior Experience Study, please visit the study’s overview page.

The Experience Studies Pro series delivers in-depth research analysis on retail individual and group life insurance and annuity products, pension mortality, disability insurance, and long-term care insurance. Learn more at www.soa.org/programs/experience-study-pro.

About LIMRA

Serving the industry since 1916, LIMRA offers industry knowledge, insights, connections and solutions to help more than 700 financial services member organizations navigate change with confidence. Visit LIMRA at www.limra.com.

About the SOA Research Institute

Serving as the research arm of the Society of Actuaries (SOA), the SOA Research Institute provides objective, data-driven research bringing together tried and true practices and future-focused approaches to address societal challenges and your business needs. The Institute provides trusted knowledge, extensive experience and new technologies to actuaries, employers, regulators, research funders and the public, to help them effectively identify, predict and manage risks. Find out more about the Research Institute at www.soa.org/research-institute.