J.D. Power: Customers struggle to understand their life and annuity products

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Most annuity customers, 59%, struggle with financial health, according to the J.D. Power 2024 U.S. Individual Annuity Study, and many say that they do not understand annuity products. 

The study, which was redesigned for 2024, measures customer experiences of the largest individual annuity companies in the U.S. based on 3,914 responses from individual annuity customers. Responses on customer experience are measured across eight categories; trust, value of price, ability to get service, ease of doing business, people, product offerings, digital channels and problem resolution. 

USAA ranked the highest among individual annuity providers, followed by Pacific Life and New York Life.

“Long-term customer satisfaction with individual annuity products is directly linked to customers’ understanding of a fairly complex financial product, which makes agent and advisor communication such an important part of the equation,” said Breanne Armstrong, director of insurance intelligence at J.D. Power, in the news release. “It’s important to note, however, that true understanding goes deeper than just filling out forms and signing on the dotted line. In fact, 43% of individual annuity customers say their agent or advisor filled out the complete application for them and, not surprisingly, those people have lower overall satisfaction scores. Advisors and agents need to educate their customers and annuity customers need to make sure they understand the details of what they are getting.”

According to the study, agents can share and promote resources often offered by annuity providers to help better inform customers about the products they are buying.

Life insurance customers experience a similar challenge. J.D. Power’s 2024 U.S. Individual Life Insurance Study finds that only 29% of life insurance customers “strongly agree” that their insurer makes complex policies simpler, and 64% of all life insurance customers say they fully understand their insurance policies. This study, based on over 4,700 responses from individual life insurance customers, ranks State Farm the highest among individual life insurance for the fifth consecutive year, followed by Guardian Life and MassMutual. 

Most respondents said that to make life insurance statements easier for them to understand, carriers should reduce complexity. Gen Z and Millennial customers say they are looking for a guide on how to read the insurance statement or links to educational videos or materials.

According to J.D. Power, 72% of life insurance customers say their policy completely meets their future needs. The study suggests that carriers can improve this by increasing personalized communication to specific customer needs that ensures better policy understanding.