NU Reports Study Finds GMWB Use Lower than Expected
The National Underwriter's Online News Service is reporting today that Ruark Consulting, LLC out of Simsbury, CT, concludes that use of the guaranteed minimum withdrawal benefit options has been lower than originally expected. If these trends continue, Ruark opines, that could be a favorable development for insurers' reserves and capital levels.
The Ruark study found in the 3 million policy years of data that only 1 in 5 are taking any partial withdrawals. Of those who are taking the partials, only 1 in 3 are taking the maximum amount allowed.
One of the things I would have been interested in that was not reported was how many of those taking partial withdrawals are taking excess withdrawals. Ruark finds 1 in 3 are taking the maximum, but I wonder how many may have gone beyond that maximum withdrawal. I look at a lot of numerical examples explaining how excess withdrawals impact values. It would be interesting to me to know how much of an impact those examples have, if any. I recognize that it is easier to determine the "how many" than the "why," but reading the report of this study made me wonder about the allocation of disclosure resources on excess withdrawals, when in fact such a small percentage of owners are taking withdrawals of any size.
Our study found that, of lifetime GMWB contractholders who took withdrawals, about 1 in 3 withdrew more than the maximum annual amount - somewhat surprising, given the reduction in guarantees that accompany that. As you might expect, the results vary widely by contract characteristics (contract size, contractholder age, degree of incentives in the product to defer withdrawals, etc.).
Here's a link to the National underwriter story:
http://www.lifeandhealthinsurancenews.com/News/2010/1/Pages/Ruark-GMWB-Use-Below-Expectations.aspx
Thank you for that link. I apologize for omitting it in my original post.