Annuities are insurance contracts that provide income benefits and are often marketed to those nearing retirement age. Companies may focus on group sales to reduce statistical risk, while some offer fixed or performance-based returns. Laws regulate marketing and some countries offer tax benefits.
Annuities are insurance contracts that offer beneficiaries income benefits. Many retirees rely on these sums as their primary source of income. As a result, annuity marketing strategies typically focus on people nearing retirement age. To maximize sales, many insurance companies also focus annuity marketing efforts on groups of people such as employees of a particular company rather than soliciting sales from individuals. There are laws in many countries that regulate how annuities and other insurance products are sold and marketed.
In some countries, annuities are covered by special tax treatment. In general, this means that the applicant’s purchase premiums can grow on a tax-deferred basis in the same way as a retirement account. Annuity marketing efforts normally focus on people who still have a reliable source of income, since these people are able to fund an annuity and realize the tax-deferred savings that these products provide. Many insurance companies publish promotions in industry magazines that are commonly read by people working as lawyers, doctors, accountants, or in other highly compensated positions. Print and circulated advertisements usually emphasize the fact that these people may be able to maintain their current standard of living in retirement if they purchase an annuity.
Annuities expose the issuer to the danger that a large number of claimants may live longer than anticipated. Insurance companies evaluate products by reviewing historical mortality tables and using this information to estimate average life expectancy rates. The more contracts a firm sells, the more likely it is that the average life span of the contract buyers will match life expectancy predictions. Therefore, many insurance companies contact major companies and market annuities as retirement products. In this way, annuity issuers are able to sell products to large numbers of people and reduce the statistical peril of the claimants’ average lifespan longer than expected.
While many insurance companies target group sales, other companies conduct direct marketing. Typically, the agents of these companies make telecommute calls to people who live in affluent areas. In many cases, these agents arrange appointments with call recipients during which the agent reviews the call customer’s overall financial situation. Annuity products are often recommended as part of an overall financial management plan. Direct annuity marketing may also involve insurance companies sending letters and promotional materials to target customers.
Some annuity products offer investors a fixed rate of return, while others involve a return based on the performance of securities such as stocks and bonds. Some countries have laws designed to prevent agents from misrepresenting these products. As a result, agents cannot make false promises about likely returns or investment security. Annuity marketing materials are typically reviewed by a reviewer or attorney to ensure that the marketing literature and materials are acceptable under regional or national laws. Companies that fail to pre-screen marketing materials often end up paying fines, which means poorly prepared advertising campaigns aren’t cost-effective.
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