Should All Annuity Illustrations Assume a 5% Interest Rate?
May 27, 2026 by Allison Bell
Wink’s Moore on the Market: Should All Indexed Annuity Illustrations Assume a 5% Interest Rate?
Well, let’s talk about that..
We need to keep in mind that fixed annuities are being illustrated at the [current] crediting rate and that Variable Annuity illustrations are capped at 8.00%. Indexed Annuities should have an illustrated rate between these two product types.
My perspective? We have a few of potential options (some no doubt more popular than others):
1. Limit insurance companies illustrating of indexed annuities to the 10-year treasury rate, plus up to two percent over that (potentially with a cap). Indexed annuities are a fixed insurance product which should outperform fixed annuities by a couple of percentage points. **This would be an overall product-level solution, as opposed to getting different illustrated rates, dependent upon which index is being utilized. It also doesn’t allow one index to be suggested over another, which is a great step in the right direction for indexed annuity illustrations.**
2. Permit indexed annuities to be illustrated at a rate no greater than [6.00%]. Again, this is a product-level solution, and not an index-level one. I liken it to how the securities side handles VA illustrations. And again, it doesn’t allow one to compare one index against another; this eliminates those lawsuits that we’ve been seeing about some hybrid indices.
3. Only permit guaranteed values to be illustrated on indexed annuities.
4. Do not permit illustrations on indexed annuities.
Take your pick.
Good luck to the folks with the National Association of Insurance Commissioners (NAIC). (We all see how indexed life’s AG-49, 49-B, and 49-C worked out. If you want to get in my head about what I suggested prior to THAT controversial Actuarial Guideline, see here: https://lnkd.in/ep8ffeh) -sjm
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State regulators should make the annuity product performance illustrations that consumers get look a lot less like performance forecasts, according to two officers of the Life Insurance Consumer Advocacy Center.
Richard Weber, LICAC’s treasurer, and Gerald Vanderzanden, LICAC’s secretary, told the National Association of Insurance Commissioners’ Life Insurance and Annuities Illustrations Working Group that one way to emphasize that the documents show how annuities could work, not how they will work, could be to make all insurers use a single, arbitrary crediting rate, such as 5%, when preparing the illustrations.
