In 2014, total annuity sales in the United States reached $235.8 billion. Variable annuity sales accounted for more than half of total sales, with sales of variable annuities bringing in $140.1 billion.
The vast majority of these variable annuities are sold by a small group of insurance providers. In fact, according to Think Advisor, close to three quarters of all sales of variable annuities were made by the top 10 companies.
Obviously, with 10 companies holding almost all of a $140.1 billion market, these insurers are making a substantial amount of money on variable annuity sales. These products are often aggressively marketed, with insurance agents and advisors promised a generous commission when consumers buy annuity products.
This can become a problem if the annuities fail to perform as promised and investors are left without expected investment benefits. An Alameda County financial elder abuse attorney can help in these difficult situations by assisting those affected in determining if they have a damage claim.
What Companies Made the List of Top Sellers?
The top companies for variable annuity sales include:
- Jackson Life, which sold just over $23 billion in variable annuity products in 2014.
- Lincoln Financial Group, which sold close to $13.1 billion worth of variable annuities in 2014.
- AIG Companies, which sold more than $12.7 billion in annuities in 2014.
- TIAA-CREF, which sold more than $12.5 million in annuity products.
- Transamerica, which had sales of slightly more than $10 billion.
- Prudential Annuities, with around $9.95 billion in variable annuity sales.
- AXA US, with just over $9.7 billion in sales
- MetLife, which sold more than $6.34 billion in variable annuities.
- Nationwide, which had more than $6.15 billion in variable annuity sales.
- RiverSource Life Insurance, with close to $4.49 billion in sales.
These 10 companies cornered the bulk of this multi-billion-dollar market. Unfortunately, many of the people who bought variable annuities from these and other sellers did not end up getting all of the benefits the consumers were expecting when doing business with big insurers.
Downsides of Variable Annuity Products
While many consumers assume that they are buying safe investments, especially if they buy from big name insurers like those on this list, this is not necessarily the case. There are lots of downsides to variable annuities, and some of the upsides (like promised tax savings) may not be as beneficial as expected.
The biggest downside for most annuity buyers is that variable annuities are very expensive. Insurers could charge a mortality and expense fee of as much as one to two percent per year to pay for a death benefit equal to at least what you put into the account. The death benefit is what your beneficiary will receive after death- and if you want to make this death benefit larger, you’ll have to pay even more.
Variable annuities also have very high surrender fees, which usually start at around five to seven percent when you sign up and which decrease over a period of around 5-7 years. Administrative costs can add to your tab as well.
If you opted for just an index fund instead of a variable annuity, you could get tax savings which was a big selling point of the variable annuity, while also saving as much as three percent annually in fees and cost.
Are Variable Annuities Right for You?
Deciding whether or not a variable annuity makes sense in your situation can be complicated. You should talk with an attorney at Evans Law Firm, Inc. to get help making sure you select the right insurer to buy from and to ensure buying a variable annuity is actually the best choice.