Ruark Consulting, LLC today released the results of its 2019 studies of fixed indexed annuity (FIA) policyholder behavior. The studies, which examine the factors driving surrenders, guaranteed lifetime income benefit (GLIB) utilization, and free partial withdrawals, were based on experience from 3.5 million policyholders from 2007 through September 2018. A total of 15 companies participated, comprising $240 billion in current account values. Highlights include:
- After a slow decline from 2010 through 2016, FIA surrender rates have climbed in 2017-18. Shock duration surrender rates in the most recent quarter rose to a level last seen in 2009.
- Surrenders are sensitive to interest rates: contracts that are credited less than 2% interest exhibit sharply higher surrenders; and as market interest rates increase, so do surrenders.
- GLIB exposure beyond the surrender charge period increased 34% from last years study, providing a more credible basis for long-term behavioral assumption models.
- Contracts with a GLIB have much lower surrender rates than those without, and even more so for those that have commenced income.
- GLIB commencement rates are influenced by age, tax status, and contract size, with a larger proportion commencing income at the first opportunity.
- GLIB utilization increases and surrenders decrease when contracts are economically in the money, reflecting longevity and the time value of money.
By aggregating across the industry, our studies offer even our largest clients a way to achieve greater precision than they could by relying only on their own data, said Timothy Paris, Ruarks CEO. And as industry experience develops, the underlying trends are becoming even clearer.
Detailed study results, including company-level analytics and customized behavioral assumption models calibrated to the study data, are available for purchase by participating companies.
Ruark Consulting, LLC (www.ruark.co), based in Simsbury, CT, is an actuarial consulting firm which aims to be the platform and industry benchmark for principles-based insurance data analytics and risk management. Ruarks consultants are frequent speakers at industry events on the topics of longevity, policyholder behavior, product guarantees, and reinsurance. Their work and commentary have appeared in numerous industry publications. Ruark enjoys an ongoing collaboration with the Goldenson Center for Actuarial Research at the University of Connecticut.
Timothy Paris, FSA, MAAA
CEO, Ruark Consulting, LLC