Milliman's 2025 RILA Study Reveals Surrender Behavior Trends Shaping Annuity Pricing
Milliman, a global consulting and actuarial firm, released its first Registered Index-Linked Annuity (RILA) Industry Experience Study for 2025, providing fresh insights into policyholder behavior. The study reveals that RILA surrender rates are very low during the surrender charge period but significantly increase immediately after this period ends, especially for large-value contracts. This surrender pattern differs from traditional variable annuities (VA) or fixed indexed annuities (FIA), showing similarities instead to multi-year growth annuities. The research examined factors influencing surrender behavior such as interest rate changes since issue, contract duration, distribution methods, and tax implications, focusing on contracts without guaranteed lifetime withdrawal benefit (GLWB) riders.
A key contribution of the study is the integration of an advanced behavioral model into Milliman's Recon® platform, which achieved a 100% actual-to-expected accuracy ratio. This model allows annuity writers to analyze industry data deeply and develop customized behavioral assumptions for RILA products, enhancing risk management and product design strategies.
The findings help clarify expectations around RILA shock-lapse rates, distinguishing them from other variable and fixed indexed annuities, which supports more precise reserving and pricing techniques. Insurers and actuaries can leverage this data-driven understanding to refine their surrender assumptions and improve alignment with actual policyholder actions, a critical element for maintaining financial stability amid evolving market conditions.
Milliman's study also underlines the importance of post-surrender charge period policy monitoring for RILA portfolios, especially as contract size grows. The research outcomes contribute to the broader annuity industry’s knowledge base on emerging product behaviors, supporting better actuarial modeling and regulatory compliance. This initiative continues Milliman's tradition of providing quantitative insights to navigate complex insurance risks.
As the annuity landscape evolves with innovative products like RILAs, ongoing data analysis and predictive analytics remain essential for insurers to adapt to policyholder behavior shifts. Milliman's study offers a valuable foundation for further industry research and practical application in experience investigations and actuarial modeling.