Eric Thomes

Many Americans are stressed out about their finances. With increased cost of living, market volatility and other economic factors, they are worried about how they will fare in retirement.

In fact, at the end of 2023, 40 percent of Americans said they are more stressed than they were last year, according to the New Year’s Resolutions Study from Allianz Life Insurance Company of North America (Allianz Life). That’s up from 34 percent at the end of 2022.

Americans want to find ways to relieve financial stress. A financial strategy that helps manage risk and volatility could help protect their journey through retirement.

Our lineup of products is designed for just that–to provide a level of protection. Here, we’ll address how our products can help mitigate risks like the rising cost of living and market volatility for a smoother retirement.

Protecting against rising cost of living
While inflation has slowed since recent highs, the cost of living does continue to increase. Because even in times of modest inflation, every dollar saved for retirement purchases less year after year. That’s why Allianz Life fixed index annuities (FIAs) and registered index linked annuities (RILAs) and fixed index universal life (FIUL) policies all offer innovative opportunities to help address this risk.

Our annuities offer increasing income potential that can help address the rising cost of living. Allianz FIAs and RILAs both offer guaranteed lifetime income that can increase each year the annuity earns a credit through either built-in or additional-cost riders.

Allianz FIUL policies also can help hedge against inflation with features like accumulation potential through indexed interest and Index Lock. Since inflation often coincides with rising interest rates, that typically creates an environment for raising the participation rates and caps on FIUL policies. This brings more accumulation potential to clients.

For our FIA contracts with increasing income potential, 90 percent have received an increase.¹ This “annual reset method” for increasing income means that income will increase by the same percentage every year interest is credited. Previous lifetime income withdrawals, fees or index losses don’t factor in. This method, available with Allianz income benefits, often results in a client receiving more opportunities for income increases. For many Allianz FIA contract holders, their income has not only kept up with inflation but their purchasing power has increased over time.²

Rising cost of living includes medical costs too. As we celebrated our 10-year RILA anniversary in 2023, we enhanced our products with additional index options and features that can help retirees pay for certain long term care expenses.

The new Income Multiplier Benefit on the Allianz Index Advantage+ Income Variable Annuity is a unique feature that allows clients to withdraw up to twice their annual maximum income payment to pay certain acute and long term care needs or they could use it for any other desired objective. Income Multiplier Benefit is automatically with the contract, and with no separate fee other than the income benefit rider fee. The Income Multiplier Benefit is not a substitute for long term care insurance.³

Protection from market volatility
Nobody can predict the market. Allianz knows that timing the market rarely works out, so our products have features that help protect assets during periods of volatility.

Many of our products have a lock feature that gives clients the opportunity to lock in gains at any time once during a crediting period. With Index Lock (available with select index options in our FIAs and FIUL products), you can lock in an index value, track and view the index values online, and help minimize the effects of market volatility throughout the year. We also have Auto Lock⁴ that, when activated, automatically locks in when an index reaches a set target.

Many of our clients take advantage of these features to lock in index gains. Among our FIUL policies with an active Index Lock, the average locked-in value is 10.78 percent. On our FIAs, the average credit among account values with an active Index Lock is 6.3 percent.⁵

While Performance Lock6 has been a feature of Allianz RILAs for several years, we added an Early Reallocation feature also called Lock and Get Back In this year. This feature allows clients who have executed a Performance Lock to reallocate their locked index option values, beginning a new term without having to wait until the next index anniversary. Rather than remaining locked through the end of the index year, clients can get back in and participate in index returns. Allianz also added a new Index Dual Precision Strategy and bigger buffers on Index Performance Strategy to products in our Allianz Index Advantage+ RILA suite. The Index Dual Precision Strategy offers growth potential in not only a positive or zero market, but also in a down market if the negative index return is within the 10 percent buffer amount. This helps our Allianz Index Advantage+ products to offer growth potential with a flexible level of protection on the downside with enhanced functionality.

Similarly, Allianz FIUL policies have unique features that help provide some insulation from market volatility, including guarantees for the accumulation value.

That means you have the ability to react in a volatile market, but you aren’t trying to time the market.

Your protection partner
With the increasing stress and mounting worries, many Americans are more likely to seek out financial guidance in the coming year. The shifting dynamics of retirement mean that financial professionals are more important now than ever. Allianz wants to be a partner for you to provide more than just a product to your clients. We know that the distribution landscape is changing. But, whether you work for an entity that is independent or owner, Allianz wants to help you provide value to clients. Allianz products help address some of Americans biggest retirement fears like outliving their money. And, ongoing economic uncertainty is affecting how Americans feel about their long term financial strategies. Finding ways to help clients take part in the market while mitigating risks can be important.
Allianz wants to be a part of your client’s financial strategies to help provide reassurance and weather market downturns over the long term. The growth potential and levels of principal protection in FIAs, RILAs and FIUL policies can strengthen the outcomes of a holistic financial strategy and help manage risk.

Allianz continues to strive to help deliver levels of protection to your clients. Allianz products that address risk can play a pivotal role in helping clients protect their well-earned retirement. We believe that FIAs, RILAs and FIUL will continue to resonate with your clients in the New Year. And, we will continue to evolve to create new and updated products.

Looking ahead to 2024, we believe clients will continue to seek a financial strategy that helps them manage risks and volatility for a smooth ride through retirement. Insurance products like annuities and fixed index universal life insurance will continue to play an important role in those strategies to help ease some of the biggest worries about preparing for long term financial stability. We’re committed to being your partner for protection in the year ahead.

*Allianz Life conducted the 2023 New Year’s Resolutions Study online in November 2023 with a nationally representative sample of 1,005 Respondents age 18+.

Annuities can help you meet your long term retirement goals by offering tax-deferred growth potential, a death benefit during the accumulation phase, and a guaranteed stream of income at retirement.

Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Variable annuity guarantees do not apply to the performance of the variable subaccounts, which will fluctuate with market conditions.

Products are issued by Allianz Life Insurance Company of North America. Variable products are distributed by its affiliate, Allianz Life Financial Services, LLC, member FINRA.

This content does not apply to the state of New York.

RILAs are subject to investment risk, including loss of principal, and contract values fluctuate daily. Investment returns and principal value will fluctuate with market conditions so that units, upon distribution, may be worth more or less than original cost.

Withdrawals will reduce contract values (including any Cash Value) and the value of any potential protection benefits. Withdrawals taken within the period stated in the prospectus will be subject to a withdrawal charge or a Market Value Adjustment (MVA), depending on the product.

All withdrawals are subject to ordinary income tax and, if taken prior to age 59½, may be subject to a 10 percent federal additional tax.

For more complete information about registered index-linked annuities and the variable option, call Allianz Life Financial Services, LLC at 800.542.5427 for a prospectus. The prospectuses contain details on investment objectives, risks, fees, and expenses, as well as other information about the index variable annuity and the variable option, which your clients should carefully consider. Encourage your clients to read the prospectuses thoroughly before sending money.

For financial professional use only.

Reference:

1. The total number of contracts used for this analysis was 42,416 and represents any increase of any amount in a given year. This data reflects fixed index annuities, which elected a withdrawal option using the annual reset increase method from 1/1/08 through 12/31/21, and would have been eligible to receive interest credits from 1/1/09 through 12/28/22. Past increases do not guarantee future increases.
2. With Allianz, your lifetime income payments will continue for the rest of your life, as long as you follow the terms of your contract. And, every time you get a payment increase, that new higher payment is guaranteed for the rest of your life.
3. Double income payments come from the Income Multiplier factor. We establish the Income Multiplier Benefit wait period and the income multiplier factor on the date the clients sign the application provided we receive the initial Purchase Payment within the required time period. Income Benefit supplements with terms for each Allianz RILA with Income Benefit can be found at www.allianzlife.com/rates.
4. Auto Lock feature may be discontinued at any time.
5. Average locked interest rate for clients who applied the Index Lock feature between Sept. 9, 2019 and Nov. 22, 2022. The total number of contracts used for this analysis was 7,970 and both one-year and two-year crediting methods were included. Potential interest varies by index strategy and index. Past results are not a guarantee of future performance. Exercising an Index Lock may result in a credit higher or lower than if the Index Lock had not been exercised. We will not provide advice or notify you regarding whether you should exercise an Index Lock or the optimal time for doing so.
6. Executing a Performance Lock or Early Reallocation may result in you receiving less than the credit you would have received had you not locked the Index Option. It is possible to lock in a negative return. We will not provide advice or notify you regarding whether you should execute a Performance Lock or Early Reallocation, the optimal time to do so, or if you execute a Performance Lock or Early Reallocation at a suboptimal time. We are not responsible for any losses related to your decision whether or not to execute a Performance Lock or Early Reallocation.

Facing Risk In The Year Ahead

How insurance products can help address the challenges of rising rates, sustained volatility and persistent inflation

As we look to a new year, many of the risks that plagued financial strategies will not go away any time soon. The financial environment created by a storm of rising interest rates, sustained market volatility and inflation at 40-year highs is challenging for even the most prepared savers and the financial professionals helping them.

In fact, a majority of Americans continue to be pessimistic about the economy, with 62 percent worrying that a major recession is right around the corner, according to a recent Allianz Life Insurance Company of North America (Allianz Life) study.*

The good news is that we have insurance products that can help mitigate these risks.

Addressing historic inflation
When it comes to inflation-fighting features, Allianz Life fixed index annuities (FIAs), registered index linked annuities (RILAs) and fixed index universal life insurance (FIUL) policies all offer innovative opportunities for clients during uncertain times. The potential for these features to help address inflation is not guaranteed. A variety of factors including interest rates, product caps and rates, market index performance, and crediting methods all affect how these inflation-fighting features work.¹

In addition to providing varying levels of protection from market downturns, accumulation potential, tax deferral, and a death benefit (during the accumulation phase) for beneficiaries, FIAs and RILAs both offer guaranteed lifetime² income that can increase each year the annuity earns a credit through either built-in or additional-cost riders.

It’s not just that increases can happen–they actually do, and often. Nearly all Allianz Life FIA customers (99 percent) received an income payment increase at least once through our income benefits.³

This ability to earn income increases may be top of mind for some clients as they begin to think about retirement during recent inflation. Our study found that 75 percent say they worry the rising cost of living will affect their retirement plans, and more than three in four respondents (78 percent) say a guaranteed lifetime income option⁴ (such as an annuity) as part of their retirement strategy would ease concerns about inflation.

Managing market risks
To help address risks that market volatility can pose to retirement security, Allianz Life offers lock features on select allocation options within certain FIAs and FIUL insurance policies, as well as with select index strategies (also called crediting methods) in the Allianz Index Advantage^® suite of RILAs.

The manual lock features allow clients the opportunity to secure an index value (or Index Option Value, for RILAs) once for each index allocation or RILA Index Option selected during a crediting period, and receive a positive credit.⁵

There is also an automatic lock feature,⁶ which gives clients and their financial professional the ability to set one or more targets (above or below—for FIUL—the current daily adjustment) for any of the select index allocations or index option values at any time before a lock is executed each term. If a target is met, it will be automatically locked in until the end of that crediting period.

This innovative feature gives clients the flexibility to potentially capture increases or limit losses during times of uncertainty. It can also help decrease the probability of receiving zero percent interest credit on FIAs and FIULs, and negative index performance until the end of term on RILAs. By electing the lock feature, clients no longer participate in any potential gains (or losses) for the rest of the term. The index value or RILA index option value used to determine credits may be higher or lower than the value at the time of request.

Diversification⁷ among allocation options on an FIA, RILA or FIUL can be another strong tool in addressing market risks. Some allocation options may offer the potential for more interest but may provide less consistency and more volatility. Others may have a lower interest potential but may provide more consistency.

Finding the right balance will depend on a client’s financial goals and risk tolerance. Because Allianz offers a number of different allocation options, clients can work with their financial professional to make an appropriate choice to fit their unique needs.

Helping financial professionals along the way
In light of our unique economic environment, the role of a financial professional has perhaps never been more important. More people say they are willing to seek out guidance from a financial professional in the coming year, according to the Allianz Life 2022 New Year’s Resolutions Study. One in three (33 percent) Americans say they are more likely to seek out the guidance of a financial professional in 2023, compared with just 22 percent in 2021.

To help financial professionals better serve their clients, Allianz Life enhanced our service model to help you monitor and identify opportunities to potentially lock in gains or index values across all product lines. These tools can help you more easily manage your book of business, and also add value for clients. You are able to easily log in to access index or performance lock reports on our website to help you identify lock opportunities for clients reaching certain index percentage thresholds.⁸

And the results can be impactful. On RILA products, we’ve helped financial professionals and their clients execute Performance Lock over 148,000 times in 2021, with an average locked-in credit of 14 percent.⁹ For FIUL clients, the Index Lock has been executed over 11,000 times, with an 11.44 percent average locked-in credit.¹⁰ Our FIA allocations with an active Index Lock have an average crediting rate of 6.3 percent.¹¹

Allianz Life is also continuing to look for ways to upgrade the experience with Allianz Life for you and your clients. For example, we recently announced our first-ever Automatic Risk-Class Upgrade Underwriting Program for the Allianz Life Pro+^® Advantage Fixed Index Universal Life Insurance Policy. This means that if your clients qualify, they would receive a Preferred Plus Nontobacco risk class (or Preferred Tobacco),¹² and the cost for their insurance is less, meaning more value added for your clients.

A partner in Allianz Life
With the tumultuous year we have had, and looking ahead to more uncertainty in 2023, the role that insurance products like annuities and fixed index universal life insurance play can be extremely important.

Allianz Life offers financial professionals and their clients innovative products designed to help manage retirement risk. We are constantly evolving to create the new and useful products that consumers want and need to a level of protection from retirement risk, and we’re committed to helping you and your clients mitigate some of the most pressing risks facing us in the year ahead. [ET]

*Allianz Life conducted an online survey, the 2022 Q3 Quarterly Market Perceptions Study, in September 2022 with a nationally representative sample of 1,004 Respondents age 18+.

Footnotes:

1. The potential for these features to help address inflation is not guaranteed.
2. Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Variable annuity guarantees do not apply to the performance of the variable subaccounts, which will fluctuate with market conditions.
3. The total number of fixed index annuity (FIA) contracts used for this analysis was 34,960 and represents an increase of any amount in a given year. Income benefits were elected from 1/1/2008 (when the first contract eligible for annual reset method income increases was elected) through 12/31/2020. Income increases are reflective of multiple FIA products and income benefits that were available at that time. Individual contracts may have seen varying amounts of income increases. There is no guarantee a contract will receive an increase in any given year. Results for fixed index contracts are not a prediction of results for RILA contracts, as they will vary. Past results are not a guarantee of future results.
4. Total number of manual and automatic Performance Locks performed between 1/1/2021 and 12/31/2021. Average locked-in credits for clients who applied the Performance Lock feature between 1/1/2021 and 12/31/2021. The total number of contracts used for this analysis was 54,469 and one-year and three-year term index options were included. Potential credit varies by index strategy and index. Past performance is not an indication of future results.
5. Exercising a lock may result in a credit higher or lower than if the lock had not been exercised.
6. This feature may be discontinued at any time.
7. Diversifying among allocation options within an annuity or life insurance policy does not ensure a profit or protection against a loss.
8. We will not provide advice or notify the financial professional or clients regarding whether clients should exercise a lock or the optimal time for doing so, or warn financial professionals or clients if it is a sub-optimal time to execute a lock.
9. The total number of index variable annuity contracts used for this analysis was 54,469 and represents Performance Locks performed between 1/1/2021 and 12/31/2021 for Allianz Index Advantage® Variable Annuity, Allianz Index Advantage ADV® Variable Annuity, Allianz Index Advantage® NF Variable Annuity and Allianz Index Advantage Income^® Variable Annuity. Potential credit varies by index strategy and index. By electing the Performance Lock, your clients will no longer participate in any potential gains (or losses) for the rest of the crediting period. Past performance is not an indication of future results.
10. Average locked interest rate percentage for clients who applied the Index Lock feature between August 17, 2019, and September 30, 2022. The total number of policies used for this analysis was 11,150. Potential interest varies by index allocation. Past results are not a guarantee of future results.
11. Average locked interest rate for clients who applied the Index Lock feature between September 9, 2019, and November 22, 2022. The total number of contracts used for this analysis was 7,970 and both one-year and two-year crediting methods were included. Potential interest varies by index strategy and index. Past results are not a guarantee of future performance. Exercising an Index Lock may result in a credit higher or lower than if the Index Lock had not been exercised. We will not provide advice or notify you regarding whether you should exercise an Index Lock or the optimal time for doing so.
12. To be eligible for the risk-class upgrade, your client’s base death benefit must be a minimum of $500,000 coverage. Flat extra cases, Juvenile, Preferred Tobacco, Rated Cases, and Table 2 cases will receive a Standard risk class.

Products are issued by Allianz Life Insurance Company of North America. Variable products are distributed by its affiliate, Allianz Life Financial Services, LLC, member FINRA, 5701 Golden Hills Drive, Minneapolis, MN 55416-1297. 800.542.5427 www.allianzlife.com (L40538, L40538-NF, L40538-IAI, L40538-IADV).

For more complete information about Allianz Index Advantage Variable Annuity, Allianz Index Advantage ADV Variable Annuity, Allianz Index Advantage NF Variable Annuity, Allianz Index Avantage Income Variable Annuity, Allianz Index Advantage Income ADV Variable Annuity and any available variable options, call Allianz Life Financial Services, LLC at 800.542.5427 for a prospectus. The prospectuses contain details on investment objectives, risks, fees, and expenses, as well as other information about the index variable annuity and the available variable options, which your clients should carefully consider. Encourage your clients to read the prospectuses thoroughly before sending money.

This notice does not apply in the state of New York.

The Evolution of Underwriting

Today’s world is completely on-demand. We can have any type of food delivered to our door in 30 minutes or paper towels on your front steps within two hours. And this expectation for getting things on demand, fast and efficiently, is no different when it comes to something as complex as life insurance underwriting.

As the industry changes to not only meet the demands of consumers who are looking to manage risk, but to also keep up with technology and regulatory changes, underwriting has evolved. From accelerated underwriting at one end of the spectrum, to complex, large cases at the other end, life insurance underwriting looks different than it used to. Here are some of the ways the practice is changing in the industry.

Need for speed
While the life insurance industry was on a trajectory to speed up the application process with increased digital capabilities, the pandemic put things on the fast track with customers suddenly not wanting to meet face-to-face or have a physical.

And carriers have stepped up to the challenge of not only conducting underwriting faster, but doing more business faster. And consumer demand is in line with these changes. In fact, according to a recent Allianz Life study, 41 percent of Americans said the pandemic increased their interest in getting a life insurance policy or increasing their life insurance.

In response to these demands, carriers have been forced to evolve their underwriting practices. For example, Allianz Life’s eSignature allows the client to review and sign their policy online making it quicker and easier for both the financial professional and policy holder. These accelerated practices will only continue to evolve in 2022 and beyond – not only due to demand from consumers, but also as the industry as a whole develops and adopts technology to help streamline the underwriting process.

A focus on specialized cases
At the same time, carriers are also focused on large or specialized cases that may require specific underwriting skills like large policies, specialized risk, or foreign nationals.

Related, premium finance is one niche segment that has gotten increased scrutiny over the past year. Many carriers, Allianz included, had great momentum with this area in 2021 and reached capacity limits, which are in place to avoid overconcentration of premium finance business which brings additional risks to a carrier that are hard to hedge away.

However, there are significant growth opportunities in the hybrid premium financing space. An increasing number of premium finance vendors are developing programs where the client contributes significantly more to the program than a traditional financing arrangement. Lenders are also becoming more comfortable with premium financing and are willing to look at clients with net worth below $5 million who might utilize these types of programs.

All that to say that while certain policies can take advantage of accelerated underwriting, these types of cases require a more in-depth, unique underwriting process.

Continued product innovation
And while the main benefit of any life insurance policy is the death benefit, fixed index universal life (FIUL) carriers are continuing to innovate on product enhancements that can help clients manage risks in retirement due to things like inflation or market volatility.

Allianz Life’s unique auto lock feature, available on select index allocation options, allows policy holders the potential to lock in an index value, once during a crediting period, and receive positive interest credits. This can help reduce risks during times of uncertainty and volatility, like we have seen over the past several years, and it also helps decrease the probability of receiving zero percent interest.

Innovating is happening at the service level, too. The same digital capabilities that enable some of those underwriting efficiencies can also make monitoring and maintaining a policy more streamlined.

For example, Allianz Life monitors inforce policies for opportunities to lock in interest credits with the index lock feature. If a policy reaches 10 percent or higher, the financial professional receives an email to let them know so they can discuss the index lock opportunity with their client. This eliminates the need for financial professionals to manually monitor targets and makes maintaining the policy even easier. To date, financial professionals and their clients have used the index lock feature in Allianz FIUL policies over 4,000 times with an average locked-in interest credit of 11.06 percent.¹

Looking ahead
As our industry looks toward 2022, the focus for carriers should remain on helping financial professionals and their clients leverage new efficiencies to make their experience easier starting with underwriting, and throughout the entire life insurance process. [JW]

Footnotes:
1) Averaged locked interest rate percentage for clients who applied to the Index Lock feature between September 17, 2019 and June 30, 2021. Potential interest varies by index allocation. Past results are not a guarantee of future results.

Guarantees are backed by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America.

Products are issued by Allianz Life Insurance Company of North America. www.allianzlife.com.