After a period of tremendous creativity, where insurance companies were adding all kinds of bells and whistles to variable annuities, the industry needs to step back and streamline the products to appeal to customers and financial advisers alike, according to research company Novarica.

“Complexity and frequent product redesign hurts variable annuity sales by extending the sales cycle when compared to other types of investments, as well as increasing compliance costs and confusing distributors,” said Robert J. Ellis, principal and head of wealth management at Novarica. “Based on our research with both distributors and manufacturer, we believe that product simplicity and less frequent redesign will lead to greater profitability.”

Two reports from Novarica show that rather than selling variable annuities as a tax-advantaged investment, advisers are beginning to emphasize their guaranteed lifetime income and talk up their use as a retirement planning tool. Novarica also recommends that insurers improve profitability by rationalizing product lines, simplifying products and lowering commissions.

The industry also needs to improve technology for manufacturing and distributing the products to increase both speed to market and sales, Novarica said.

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