What are the best strategies for annuity marketing?

Annuities expose the issuer to the danger of a large number of beneficiaries living longer than expected.

Annuities are insurance contracts that provide income benefits to beneficiaries. Many retirees rely on these sums as their primary source of income. Consequently, annuity marketing strategies typically focus on people who are close to retirement age. To maximize sales, many insurers also focus annuity marketing efforts on groups of people, such as employees of a particular company, rather than soliciting sales from individuals. There are laws in many countries that govern how annuities and other insurance products are sold and marketed.

In some countries, annuities receive special tax treatment. Generally, this involves the pensioner purchasing premiums being able to grow on a tax-deferred basis in the same way as a retirement account. Annuity marketing efforts are typically focused on people who still have a reliable source of income, since these individuals are in a position to finance an annuity and realize the tax-deferred savings that these products offer. Many insurers run promotions in industry newspapers that are commonly read by people who work as lawyers, doctors, accountants or in other highly paid positions. Print and broadcast advertisements typically emphasize the fact that these individuals may be able to maintain their current standard of living during retirement if they purchase an annuity.

Annuities expose the issuer to the danger of a large number of beneficiaries living longer than expected. Insurers price products by reviewing historical mortality tables and using this information to estimate average life expectancy rates. The more contracts a company sells, the more likely it is that the average lifespan of contract buyers will mirror life expectancy predictions. Therefore, many insurers contact large companies and market annuities as pension products. By doing this, annuity issuers are able to sell products to large numbers of people and reduce the statistical risk of the average beneficiary living longer than expected.

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While many insurers target group sales, other companies do direct marketing. Typically, agents of these companies make tele-consulting calls to individuals who live in affluent areas. In many cases, these agents make appointments with the recipients of the call, during which the agent reviews the overall financial situation of the calling customer. Annuity products are often recommended as part of an overall financial management plan. Direct annuity marketing may also involve sending letters and promotional materials by insurers to target customers.

Some annuity products provide investors with a fixed rate of return, while others involve a return based on the performance of securities such as stocks and bonds. Some countries have laws designed to prevent agents from making false statements about these products. Consequently, agents cannot make false promises about likely returns or investment safety. Annuity marketing materials are typically reviewed by an auditor or attorney to ensure that literature and marketing materials are acceptable under regional or national laws. Companies that do not pre-screen marketing materials often end up having to pay fines, which means poorly prepared advertising campaigns are not cost-effective.

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