Annuity Persistency

Annuity persistency refers to the length of time that customers are holding-on to their existing annuity contracts. Annuity owners have the ability to cancel and/or exchange existing contracts for other financial products with more beneficial features. U.S. tax laws permits exchanges into other financial products through Section 1035 of the tax code, but annuity owners may decide to stick to their current contracts because of features that work to their advantage. This “sticking to it” is referred to as persistency, and it is something that is watched and measured closely by insurance companies because of the expenses associated with finding new customers. Some insurance companies will also pay out a persistency bonus if annuity contract owners keep their contracts beyond a certain minimum period.

Annuity Product Persistency Levels are Increasing

Annuity persistency refers to whether people hold on to their existing annuity products or exchange them--typically through a Section 1035 exchange --for new products. Higher levels of persistency suggest that annuity owners are sticking with existing products which are likely more valuable than what would be available in the current market through an exchange.