Product Availability
Just because an insurance company offers a particular type of product does not mean that it is available in your state of residence.
There are a few things that need to be in place in order for you to purchase an annuity from an insurance company.
First, the insurance company must be licensed and actively operating in your state. For a number of different reasons, many insurance companies will not operate in certain states. This is less common with annuities and life insurance, but it is still a consideration.
Second, the insurance company must offer the type of product that you are seeking. There is no insurance company that offers a comprehensive list of annuity types in all states. Insurance companies tend to specialize in particular product areas. For example, New York Life is known for fixed annuities while Prudential is known for variable annuities.
In addition, the same product offering may vary slightly between states. Regulatory requirements may differ between states and these differences will be reflected in product pricing and features.
The last point of consideration involves distribution. Insurers need advisors to sell their products. Developing strong distribution can be challenging, time consuming and expensive. Some insurers will have strong distribution and some will naturally be weaker. The depth and quality of an insurance company’s distribution will impact its ability to effectively reach new customers with their product offerings.
Distribution Channels
The term distribution is used here to refer to insurance company product marketing and sales.
Similar to other industries, insurance companies have options with respect to the manner in which their products are marketed and sold. The various distribution options or routes are sometimes referred to as channels.
For example, some insurers sell their products exclusively through captive agents. Captive insurance agents represent a single insurance company and can only sell that company’s set of products to their customers. In contrast, independent insurance agents are free to contract with and represent multiple insurance companies.
Some insurance companies will focus on independent financial advisors, which may include registered investment advisors, fee-based advisors and fee-only advisors. Other carriers may focus on bank distribution or wire house distribution.
When it comes to distribution, the key point to consider as a consumer is that the insurance company’s channel or channels of choice will significantly impact your buying experience. Not all channels or advisors are created equal. This is why it is important for you to first find an objective, competent financial advisor you can trust. That advisor can then develop a financial plan and explain to you how any annuity might fit into that plan.
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