Why Do Insurance Companies Sell Annuities?

  1. 0 POINTS
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    David RacichPRO
    Fountain Hills, Arizona
    All financial product manufacturers develop and distribute product to make a profit. Insurance companies manufacture product to accomplish the same. An annuity is a mortality product, comprised of the difference of their gross returns and what they credit to the annuity, i.e. the spread. They also make money on the mortality expense they assign to the annuitant based on the annuitant’s gender, age and life expectancy, which can with some carriers be underwritten. 
     
    Answered on June 11, 2013
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  2. 145 POINTS
    Omar Sangurima
    A better question would be, why not? You get a supplement to retirement income that you should not outlive (if the annuity is planned correctly) and the company gets to use the money you invest to make a profit, sometimes returning some of that back to you if the annuity is of the variable variety. A win-win in the right situation.
    Answered on June 11, 2013
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  3. 440 POINTS
    Albert Rasmussen
    owner, retireright, sc
    Insurances go back hundreds of years. Annuities are an life insurance products that has revolved to be one of the many retirement vehicles in the money world. Their are several reason insurance companies sell annuites. The most likely reason ii that based on mortality its a good form of capital to use to make a profit for the company. It has legal advantages some money instruments do not have. It is a good vehicle to move money from a person estate upon death to their beneficiarys. This another reason insurance companies sell annuities. An excellent service to the general public.
    Answered on September 11, 2014
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  4. 37376 POINTS
    David G. Pipes, CLU®, RICP®
    Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
    A life insurance company works primarily with statistics. The basis upon which life insurance policies are designed is exactly the same as the basis for annuity products, life expectancy. If a person lives past normal life expectancy the company with a life insurance policy is probably experiencing a “dividend” in that they have not yet had to pay out the death benefit. If the same person also had an annuity he or she would be receiving more than the company originally planned for. One “dividend” balances the other making an annuity the ideal product to balance a life insurance company’s portfolio.
    Answered on September 17, 2014
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