Milliman Study Finds Surrender Rates on VA GLWB Contracts More Than Double Since 2022
Milliman's latest Variable Annuity Industry Experience Studies reveal a significant increase in surrender rates for variable annuities (VAs) with guaranteed living withdrawal benefits (GLWBs), more than doubling from 2022 through the end of 2024. These studies cover policyholder behavior across 23 companies over 17 years, highlighting industry-wide trends. The rate of GLWB contracts initiating income withdrawals has also risen by approximately 20% during 2023-2024 compared to the prior two years.
The findings suggest policyholders are increasingly surrendering GLWB contracts even when surrender charges apply, particularly for contracts that are at-the-money or moderately in-the-money. This shift may reflect reactions to rising interest rates and the attractiveness of alternative annuity products, such as fixed indexed annuities (FIAs) with GLWBs offering high premium bonuses above 20%.
While contracts deeply in-the-money show low surrender rates, those less deeply valued are more susceptible, signaling an evolving risk landscape for life insurers concerned with policyholder persistency and balance sheet impact. Distribution channel differences also play a role; VAs are sold primarily by fiduciary advisors whereas FIAs have broader distribution via agents and independent marketing organizations.
Policyholders tend to maintain persistency better when the account value is lower relative to the guaranteed value, yet the increasing surrender trend across various guarantee types indicates the need for insurers to closely monitor market dynamics. The comprehensive dataset spans 110 million contract-years from 2008 through 2024, underpinning robust analysis of evolving surrender behaviors.
These insights on surrender patterns, income utilization, and contract "moneyness" provide critical understanding for insurers managing GLWB risks amid a changing economic environment characterized by competitive product offerings and shifting policyholder priorities.