If You’re Not First, You’re Last: Prudential Releases Fixed Indexed and Direct-to-Consumer Annuities Years behind Competitors

by on May 02, 2018

Prudential’s piloted direct-to-consumer annuity offering follows the release of its first fixed index annuity, but the firm is years behind in offering either product. This leap into new products and distribution options comes as variable annuities maintain a seven-year decline in sales. Even with encouraging markets, consumers still feel trepidation post-recession.

Since 2011, sales of variable annuities have consistently decreased; however, fixed indexed annuities continue to climb, with a record year in 2016. Pacific Life is one competitor that launched its first FIA, after regulations made it clear that insurers would be able to sell them. Following in its footsteps in late January, the PruSecure series aims to offer protection against market drops through one-, three- and five-year index term options with two investing options. The two variations—PruSecure Advisors and PruSecure Select—offer availability between RIAs or unspecified brokers and dealers, respectively. The offering marks a new direction for the firm, which joined the FIA crowd significantly later than its competitors.

LIMRA VA and FIA Annual Sales Table

Just two months later, the firm reached its first distribution agreement for its inaugural direct-to-consumer annuity, a product model with increasing popularity. The new Guaranteed Income for Tomorrow (GIFT) voluntary deferred income annuity will be distributed through worksite customer relationships, including employers and associations. Because the annuity is voluntary, employer influence is limited to offering the annuity to employees. A main promotional point for the firm is the flexibility provided to clients, who can make after-tax contributions as low as $100. As these online products gain momentum, we expect to see this pricing competition increase, particularly because of startups’ low-cost “subscription-based” annuity platforms.

Along with lower costs, direct-to-consumer annuities call for more consumer-facing education. Prudential stated in a press release that it plans to address this with helpful resources and a dedicated service team, all available on an online platform. The firm has provided little information about the platform, however, noting only that clients will be able to enroll, contribute and maintain their accounts. As with the FIA, Prudential is not the first firm to release such a product, with Annuities.direct coming to the market in 2016 and larger competitors following suit. The firm recently elicited an article before announcing the launch, receiving rare publicity for such an instance.

The firm’s release of both products in the first quarter sets 2018 up to be a year of experimentation and development, particularly after the first market shake-ups in nearly seven years. These new offerings put Prudential in a new competitive space, broadening its reach and creating more opportunities for business. As the year continues, we will see if the firm expands its offerings to compete with fellow variable annuity providers.