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New York Life and Immediate Annuities Case Study

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MKTG 763  

Seminar in Sales Management

New York Life and Immediate Annuities


Chunxiao Bao
David Warren-Angelucci

Peyman Mortezaie

Wei-Chen Wu

1.   Problem Statement 

The owner of NYL (New York Life), Ted Mathas, wants to inspire a growth in the market for immediate annuities, titling GLI (Guaranteed Lifetime Income) as the name NYL gives its customised immediate annuities, while, at the same time, trying to capture a significant percentage of that market share. However, GLIs are currently not being recommended to potential customers by their NYL agents who are not as motivated to sell GLIs as Ted Mathas would need them to be in order to build consumer-awareness of the existence of GLIs, create market demand for immediate annuities by demonstrating the financial value of that product to consumers, and ultimately stimulate new highly-profitable revenue streams for NYL by showcasing the various benefits of GLIs.

2.   Situation Analysis 
Currently, NYL has various products and services which it offers the general public as ways of insuring the well-being of their financial assets in the years before and after death.   Because this case is focusing on growing a specific product in the annuity market, GLIs, we recommend that NYL focus on improving, innovating, and shifting focus from their current financial products: life insurance, immediate annuities, and deferred annuities(fixed and variable). NYL insurance agents currently sell each of these products/services at differing levels of priority; based on industry analysis, the product sales priorities of NYL agents are listed as follows:

  1. Life Insurance
  2. Deferred Variable Annuities
  3. Deferred Fixed Annuities
  4. Immediate Anuuities

In order to lay a foundation for our subsequent recommendations, we should first detail the basic principles of each of these four NYL products, assess the pros and cons of each offering, and analyze them from both the standpoints of the consumer and the agent. Appendix A shows a comparison table of each product NYL offers. The 5 C’s below will analyze the key factors of the situational analysis.

2.1 Company: 

New York Life has a vast market share with a long standing reputation. In 2008, New York Life had about 250 billion dollars of assets being managed, 14 billion dollars of operating revenue, and 1.28 billion dollars of operating profits.  In 2009, New York Life was the third-largest life insurance company in the united states, and placed 76th in Fortune’s ranking of top U.S. firms.  

2.2 Customers:

New York Life’s current customer base consists of current retiree’s or soon-to-be retiree (those in or approaching their retirements years). NYL’s current customer base is mostly in the middle market, such as a family of four with young children and $70,000 in income. Most customers are not aware of the benefit of immediate annuities, not willing to change, not aware or fully educated of the current retirement issue.

2.3 Competition:

New York Life is one of the three largest insurance companies, placed just behind industry giants, Metlife and Prudential Financial. Competitors, like MetLife, are introducing new products which bundle stocks and deferred fixed annuities together for diversified portfolios; this puts NYL’s annuity-market share at risk.

From an alternative standpoint, NYL has the potential for creating problems for themselves due to cannibalization of the financial products which they already provide.  For example, by shifting their focus to the GLI market, NYL creates the risk of taking away sales of deferred annuities and/or lucrative life-insurance policies.

2.4 Collaborators:

New York Life has roughly 500,000 independent investment advisors as well as company-based investment advisors. Distribution agreements were created in collaboration with banks like JP Morgan Chase, Wells Fargo, PNC, and Bank of America. Also AARP, a non-profit membership-organization for people aged 50 and over, collaborated with NYL on their marketing campaigns and can be considered a significant source of resources for inspiring growth in the GLI market.

2.5 Context: 

Americans are living increasingly longer lives which is putting them at risk of outliving their retirement assets. The US government and corporations are cutting back on their retirement benefits and dependency on social security creates a risk to long-term financial stability because, as baby boomers near the age of retirement, the pool of funding for social security will deplete at increasing rates creating the possible threat of insolvency in the next few decades.

3.  Alternatives

3.1 Alternative: Focussed on Growing the Market for Annuities 

Currently, the market for annuities is relatively small compared to the size of the markets for other financial insurance products.  There are various reasons for this, but the overall situation presents an opportunity for NYL to exploit.  One main reason for the stagnancy of the annuities market is directly related to the buying processes of consumers in the financial insurance markets. We have identified two main causes of this: consumer awareness of annuities as a viable option, and consumer reluctance to change.

Many customers likely have never been educated on the benefits of annuities. If someone does not understand how a product works (especially a highly technical product like this one), it will be difficult for them to see the value of that product; there will be resistance to investing in making a significant investment in something they don’t understand.  Advertisements for annuities may be effective for consumers who are versed in the financial services market, but it may be difficult to convert a majority of the public from impression to sale without effective advertisements which describe the simple benefits of annuities.  In order to influence revenue growth in the GLI market, NYL should focus on investing in consumer-relevant advertising campaigns.  



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