Ruark Consulting Releases 2019 Fixed Indexed Annuity Study Results

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 year’s 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, Ruark’s 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. Ruark’s 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.

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