Annuity sellers need to work harder to satisfy customers, finds JD Power – Insurance News

A new survey from JD Power finds that 43% of growers fill out annuity applications for their customers. Not surprisingly, they are the buyers least likely to understand what they bought.

A majority (59%) of current annuity customers struggle with their financial health and many do not fully understand the products they are purchasing, the JD Power 2024 Individual Annuity Study concluded.

The study measures customer experiences of the largest annuity companies across eight core dimensions (in order of importance): trust, value for money, ability to get service, ease of doing business, people, value proposition products, digital channels and problem resolution, explained Breanne Armstrong, director of insurance intelligence at JD Power.

Some of these eight dimensions can come into conflict when a producer is trying to close a sale. For example, filling out the application for the customer “seems very helpful,” Amrstrong told InsuranceNewsNet, “but ultimately they end up not understanding the product as much, because they missed that initial education component.

“So it’s a little bit easier to do business and you might value people a little bit more, but ultimately it translates into less understanding in the future and less satisfaction.”

JD Power repeats the survey annually but has redesigned this year’s version. Data on who actually fills out the application is one of the newly refined questions, Armstrong explained. The 2024 study is based on responses from 3,914 individual annuity customers and was sent from April to July 2024.

The resulting scores put USAA and Pacific Life in the lead.

Education is fundamental

The most satisfied annuity buyers are those who receive educational tools and attention early in the process, Armstrong said. And companies with an “exclusive agent relationship” seem to do better in this part of the process, he added.

“We tend to see brands that have a better onboarding process and customers feel more comfortable,” Armstrong said. “I feel like they understand things more during that part of the process. (These companies) tend to have a better score, a better rating overall.”

That’s not to say that annuity companies operating in the independent channel can’t keep up. They just have to work a little harder to earn a satisfied customer.

“You can counter that by being a brand that has these additional tools available and educational materials, and helping inform customers of the product,” Armstrong said.

Annuity products vary from simple income annuities to much more complex indexed products and variable products with sub-accounts and brokers. The industry suffered decades of reputational damage due to product complexity and poor sales.

Increased interest in digital

Understanding of the annuity contract and costs and fees is significantly higher when the agent or advisor provides the customer with information about navigating the provider’s website and/or mobile app or directs the customer to videos educational benefits available on the annuity during onboarding, JD Power said.

Recent studies reveal a “tipping point” in digital engagement of annuity sellers, Armstrong said. The results are starting to show on the side of satisfaction.

“When we start to cut down on data among people who have used some kind of digital tool, but especially if they can access an app, we see much higher satisfaction overall,” he said.

Rising expectations of what a website should offer, what an app should provide, are likely to drive the continued evolution of digital.

“I think what’s happening is that a lot of annuity providers are starting to realize that you can’t just have this table stake of having an app available now, because that was just the first step,” Armstrong said. “I think a lot of companies have fallen behind and are still a little behind in the digital piece of annuities.”

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John can be contacted at (email protected). Follow him on Twitter @INNJohnH.