Low interest rates lead to collapse in structured settlement annuity sales

In this weeks edition of Speaking of Settlements, I take a look at a disturbing report put out by LIMRA in the last week of May, outlining the massive drop in sales of fixed annuity products across all annuity sellers and underwriters. This industry report dated May 23rd, 2010, indicates in 2010 that fixed annuity product sales are down over 50% from 2009, which as everyone knows was a horrible year for structures, so we are certainly scraping bottom now, with little hope in the near term for a jump in sales in the current climate.

While these numbers don't specifically include structured settlement annuities, which are of course fixed interest rate products, the gross industry numbers only confirm what those of us in the structured settlement profession already know, and that is we are suffering through the single worst selling period in our professions 30 year history.

Why? Well, it doesn't take an economic degree to figure it out and that is you can't sell anyone a product which, in some short durations, is yielding 0% or close to 0%. No one in their right mind is going to fund a structure when rates are this low unless their is a compelling planning reason such as protecting a minor, medical underwriting advantages, or as I see in my practice, by using a non-qualified structure to spread out the income tax hit. We can dress this up any way we want, but the facts are until the US Government and the Treasury/Federal Reserve end this policy of driving rates close to zero to help restart the moribund US economy, we are stuck in this trough and we aren't getting out any time soon.

( More on the "wisdom" of pouring money into government programs and give backs vs pumping money into the private sector and smaller banks at a later time.)

So, what to do if you are in the settlement profession and need to feed a lot of hungry mouths, let alone keep the door open during this slump? I will be starting a series in June and July covering sales ideas, income generating plans and other options, as well as cost containment strategies for your practice. Look, it's not going to be easy, but it's crucial that during this time you use it wisely to look at your marketing, operations, overhead and future markets and position yourself for success. Rates will go back up, taxes will be going up and people will need our products and services, it's just a matter of riding it out and looking hard at what you need to be doing now.

Posted on June 7, 2010 .