Why Teachers Terrify Annuity Issuers
October 23, 2019 by Allison Bell
For financial professionals who are new to selling annuities, one of the most sobering things to learn may be that, from the perspective of any company promising to pay a customer a lifetime stream of income, a long life is a risk, not a blessing.
Of course, the people who work for issuers want the annuity holders to live long, happy lives. Life insurance company executives boast proudly of their industry’s role in helping millions of people enjoy their later years.
Annuity issuers can compensate for the effects of longevity risk by selling life insurance policies and other products that do better when the insureds live longer, and by sharing risk with reinsurers.
But, all other things being equal, issuers of lifetime annuities tend to pay out more cash when the annuitants live longer.