TIAA, one of the largest U.S. annuity providers and one of only a handful that sell no-load, fee-only life insurance policies, is exiting the life insurance business by the end of the year.
According to InvestmentNews, a memo last week from Dennis Rupp, TIAA’s director of insurance wholesaling, confirmed the exit but stated the company’s annuity business will be unaffected by the strategic decision. TIAA will cease the manufacture and distribution of its life insurance products by the end of 2019, according to the article.
TIAA will continue to service its existing term, universal life and variable universal life insurance policies, and will honor any life insurance cases with a completed application submitted by Sept. 30, according to the memo.
A TIAA spokesperson told InvestmentNews the company moving forward will offer a variety of solutions from other carefully selected providers to meet its customers’ life insurance needs.
The article notes TIAA’s exit from the life insurance business is particularly bad news for registered investment advisors (RIAs), as the company was one of just a handful that sold no-load, fee-only life insurance policies. No-load policies allow RIAs that don’t receive commissions to count the cash value in a life insurance policy toward the client’s overall assets under management.
More advisors are expected to move toward offering fee-only policies due to a New York state rule going into effect next year that requires life insurance sales to be in clients’ best interests, and a new fiduciary standard for certified financial planners is set to take effect this October.
According to S&P Global Market Intelligence, term insurance makes up the bulk of the existing book of individual life insurance business for TIAA. As of year-end 2018, the insurer had almost 150,000 policies in force with 81% being term policies. The amount of insurance for the term block was $53.38 billion, compared to a total of $11.17 billion for other product lines combined.
- Click here to read the original InvestmentNews article
Thanks for the post, first I had heard about it.
They had a very low pricing strategy for their UL. No wonder it did not work.
I love the part of the article that says agents in NY were going to try to be fee only to satisfy the best interest requirement. So, a 1% AUM charge to the cash value each year for 30 to 70 years would be in the best interest of the consumer instead of the rep being paid a 1x 50-100% commission on the 1st year annual premium & a couple % renewals on the premium? Me thinky a 1% AUM charge on the CV might provide a much higher total revenue to the rep over the decades. But, who knows, maybe the total charges, loads, COI would be better if the scary agent hadnt made a commission.
I have zero issue with fee based model, but the assumption it is somehow magically always best interest to consumer is very naive. I would much rather pay a 1x 2% load on my $1M IRA rollover as a consumer than to get charged 1% every year for 30-50 years.
The article says a heavy percentage of the policies currently in force are term.
Would this mean that any renewal or conversion options in the original policies would no longer be available for the policy holders?
Hopefully someone can clear this up, I thought only life insurers could issue annuities? So how is TIAA going to continue issuing annuities if they are no longer issuing life insurance?
Jackson National quit selling life insurance about 5-7 years ago. I believe Hartford quit issuing life policies as did a couple other large life insurers that decided they couldn't price products in this low interest rate environment to make them a profit. Apparently more profit & less risk to,issue new annuities than life insurance
It does not mean you cease to be a life insurance company just because you don't issue new life insurance policies. As others have pointed out, there are lots of life insurers which continue to operate, but do not issue new policies.
Does it? Seems one of the requirements of being something is that you continue to do something. It is hard to say you are a life insurance company when you no longer issue life insurance policies.
I wonder how long until a regulator decides this merits more investigation.
Annuities are by definition & insurance regulation a life insurance product. Thus, an agent with only a life insurance license can sell them Even If they never sell life insurance policies like term, WL or UL
American Equity has never sold life insurance, only annuities.
Typically these companies continue to operate the in-force policies they already have on the books.
And nothing says they can't come back into the market with new products at a later date.
Eh, not really. The authority to issue annuities is part of the authority to issue life insurance.
While I get where you two are coming from. I do question if this will bring regulatory interest at some point. If the state legislatures had intended for companies to be annuity companies only, then they would have created it. Instead, the authority to issue an annuity is contingent on the authority to issue life insurance.
Life annuities are insurance and the benefits are directly linked to your "life". No company, licensed for life insurance, is duty bound to offer all the possible products that might be made available and regulated under that license.
I understand. But, will the regulators then come down hard on Progressive and Geico for not manufacturing Homeowners insurance?
I dont see this being an issue anytime soon as there is so much competition in the industry it has been driving down the cost to the consumer for term life products. Ironically, some of that competition, along with way higher expense ratios for tech costs & regulation are causing some carriers to drop the manufacture of life insurance to focus on annuity. The cost to reprice all current & existing products with new mortality tables can be a massive undertaking, maybe so much to call it quits on life
Sadly that does not hold water as the authority to issue auto insurance is not contingent on the authority to issue homeowners insurance.
I do agree with the second part. And as long as it remains that way, it is likely regulators won't care. If and when it changes, then their level of interest may change as well.
Agreed, and that's a good thing.
Don't agree here. Most companies reprice fairly routinely and while the new mortality tables have pushed some sooner than I think they might otherwise would have liked, I don't think that is the real problem.
In fact some companies are now increasing their rate of repricing. We see some of the most competitive companies changing rates as much as 3 times per year.
Compulife (my company) recently release a "Batch Analyzer" tool which does about 100 quotes per second, based upon the broad parameters stipulated by the user, and the results are exported directly to a spreadsheet file. Over 20 companies are now using this option to maintain a close and careful eye on their competitors to the market, and are making adjustments to their pricing as needed.
Given that the term life market has gotten more and more competitive, it also means that it is less profitable than in years gone by. Companies with a casual interest in the market, and who do not streamline their costs and generate volume, will find it much less attractive than it was.
The population is aging, and many people are increasingly getting past their term buying years.
Millennials don't seem to have the same feelings of responsibility toward their dependents, and are less inclined to be life insured.
I believe there is a growing failure of new agents to prospect. Many agent are trying to use selling methods (aka order taking) that rely upon the consumer coming to them. That means many consumers are increasingly under served. Many of the companies that offered traditional sale training to captive sales forces are walking away from that. The brokerage market has failed to come up with training alternatives.
I fully expect mergers and acquisitions to continue and more and more carriers to step back from the term market. I don't think there is any reason to think we need a market with 100 life insurance companies selling term life insurance.
great points. I agree. I am just saying if some carriers feel like the pace of change & expectation of consumers and agents for innovation on top of constant repricing, maybe they believe it is taken too much focus from their more profitable lines of business such as EIA or VA, etc