The Product that Never saw the Light of Day, Redux

I love my readers.  How many Variable Annuity [VA] products got mentioned to me as a result of yesterday’s article? Four, out of 2 emails, 3 comments, and one clever guy who figured out my phone number (no, I don’t keep it secret).

  1. Vanguard’s VA offerings
  2. Fidelity’s VA offerings
  3. Symetra’s VA offerings
  4. Jefferson National’s VA offerings

In my opinion these are some of the better VA options out there.  It’s not quite what I proposed in my article, where every major mutual fund would offer T-shares, but they are close.

My main differences with these products is that:

  • the expense charges going from taxable to annuity should be smaller.
  • there should be more choices, aside from Jefferson National.
  • it would be better if the mutual fund companies took the lead in these matters.

As an aside, I pushed for products like this from 1996-2006.  By the time I gave up, I concluded that there was no one willing to offer variable annuity products that were truly cost-efficient.  Now we have at least four contenders, though I think my product idea would be better still.

But incremental improvement is a good thing.  Thanks to those who commented, emailed, and called.


  • TimP says:


    Read your previous article and now this one. I think your idea would not pass muster as an insurance product. There needs to be some form of guarantee to the the product, otherwise you are just selling tax-deferred mutual fund accounts.

    Insurance costs real money — to guarantee a death benefit on a variable account value has to involve some tricky actuarial work — I would like to hear your feedback. Putting a guarantee on the annuity payout benefit adds additional cost.

    Too low pricing on variable annuities could put the insurance companies in the same boat they climbed into with disability insurance a few years back. A serious multi-year bear market could put these companies on the hook for significant payouts on account value guarantees.

    • Dear Tim,

      That was something that I wondered about. Thanks for saying that. I could see a product with a limited lookback, like the highest value over the last year, as a death benefit guarantee… maybe that could go for 50 bp/yr. That would qualify, but not be expensive.

      That said, if there are annuitization provisions in the VA, doesn’t that cover it? After all, only 0.5% of all fixed annuities get annuitized, and they qualify as insurance products even though they act like savings accounts.

  • TimP says:

    I do not think the any life insurance company would be that progressive if they could get regulator approval. They have enough trouble making money with the current batch of VA products.