A higher number of insurance carriers are offering in-plan annuity options and advocating for retirement education as more participants express concerns of increased volatility and market risk.
The new findings come from Goldman Sachs Asset Management Annuity Industry Survey, “Driving Retirement Outcomes,” which shows that 71% of firms offer in-plan retirement income annuity solutions. When asked how they select their annuity partners, insurance carriers say they relied on brand names and their relationships with plan sponsors to make their decisions.
Carriers in the survey also indicated a desire for more advocacy and education surrounding annuity and retirement trends, with 36% noting that in-plan retirement income is a high priority for them. Meanwhile, insurers said they’re focused on providing protected solutions, like buffered solutions/defined outcome investment funds (45%), over the next 12 months. Insurers surveyed say this push is driven by industry demand and the ability to capture more upside with a potential downside protection/risk reduction.
“Our latest Annuity Industry Survey reveals how U.S. based insurance carriers are navigating the current market landscape to better equip clients for their retirement journey,” said Marci Green, head of Retirement Intermediary and Insurance Distribution of Goldman Sachs Asset Management. “The data shows how U.S. annuity providers are focusing on long-term goals and solutions, and balancing macroeconomic risks, to help drive retirement outcomes for underlying investors.”
Others are incorporating artificial intelligence (AI) technology to uncover new business opportunities. Fifty percent of insurers say they’ve used AI to increase their sales efficiency, and 11% are offering AI/big data investment strategies on their annuity investment platforms while 27% are considering it.
Increased demand as investors fear risks
Goldman Sachs points to macroeconomic risks for informing product decisions among insurers. According to the findings, insurers say overall economic threats in 2024 include credit and equity volatility (58%), an economic slowdown/recession in the U.S. (57%), and U.S. politics, tax reform, and inflation (39% each).
Sixty-two percent of investor respondents expect a U.S. recession within the next two to three years, while 73% believe inflation risk will last at least another two to five years. Regarding interest rates, 76% forecast one or two additional cuts from the Federal Reserve in the second half of 2024.
The asset manager anticipates increased demand among registered index linked annuities (RILAs) in the next three years, heightened annuity adoption among registered investment advisor (RIA) firms, and a surge in in-plan annuity implementation.
“What jumps out from our results is that US investors are seeking retirement security, but they do not want to miss opportunities to grow their money, their nest eggs,” Green added. “They want to be invested in equities, but they also want to sleep well at night knowing they have some downside risk management. The annuity industry’s innovation is again on display given the focus on offering solutions that are designed to meet these needs.”
Goldman Sachs’ survey included input from 150 industry participants—a 10% increase over last year—and aggregated across 34 insurance companies. Responses were drawn from highly tenured professionals, with more than 70% having average tenures greater than 15 years, the firm notes.
Editor’s Note: A previous version of this article mistakenly wrote that employers, instead of insurance carriers, were offering more annuities due to market fears. These mistakes have been corrected to accurately reflect this data point.
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