Do you have any food allergies? You know, those strange physical reactions you have to certain food-stuffs that others don't think twice about consuming?

It is something you cannot overcome because it is in your nature; there is nothing you can do about it. You were born with it and you will probably die with it and the sooner you obey it's command, the better! Life Insurance companies offering fixed annuities also have a  genetic predisposition as well. They are entirely, incontrovertibly sensitive to the phenomenon of current interest rates.

Why would this be the case?

Insurers are restricted, within limits, from speculating in the stock market with risky investments because State laws regulate their investment choices and reserve requirements. As such, the guarantees that insurers provide to policyholders (and those guarantees cannot be changed once a policy is issued) actually restrict an insurers own portfolio investment choices heavily to the realm of fixed income securities such as bonds, both corporate and treasury, which are heavily interest - rate sensitive devices. The low interest bearing bonds backing up much of an insurers portfolio must earn a superior return for the insurance company than what that company guarantees on its annuity contracts in order for the company to be profitable.

And In light of the current squeeze on insurance company profits due to these extremely low interest rates, insurers have lowered the minimum guarantees offered in new fixed annuity and indexed annuity policies. Whereas prior to 2007, interest rate minimums for the majority of new fixed deferred annuity issues was 3.00% annually, in 2014 that minimum floor hovered around 1% annually, and in 2021 today has even hit 0% in many contracts. (These are minimum contractual guarantees - not potential crediting rates which can be much, much higher).

The result of this reduction measure allows insurers to lower their reserve requirements and thus increase operating efficiencies.

Since it impossible to compel annuity prospects to purchase annuities on the merit of high fixed interest rates that do not exist, Insurers have thus been forced to become more creative.

And after putting their creative caps on, insurers discovered a bonanza in the effective marketing of a solution to the well promulgated demographic trend of increasing life expectancies and stock market uncertainties (collectively known as the "longevity risk" phenomenon).

Insurers are selling the "longevity risk" concept en masse. Their solution is that longevity risk (fear of running out of money) can be mitigated by guaranteeing to oneself a lifetime income from an annuity that provides a lifetime income rider feature. The lifetime income rider is an annual payment made by a policy owner (the cost is anywhere from .40% to 1.25%) that enables the insurer to guarantee a lifetime payment at a certain point in time of the owners choosing.

To understand the longevity risk proposition, insurers are simply betting that you will not live much beyond your life expectancy, and you are betting that you will. In most cases, the illustration at the point of sale should inform the policy owner what he or she can expect at a certain point in time so that the policy owner can mathematically determine if the income rider makes sense.