The 13% Drop No One’s Talking About: What 2024’s Life & Annuity Slump Really Means for Financial Professionals

Is the industry slipping—or simply shedding its outdated skin?

Let’s start with a hard truth: the U.S. life and annuity sector just posted a 13% drop in net income, totaling $33.3 billion for 2024. That’s no small slip—it’s a red flag. The headline comes courtesy of AM Best, which pinned the downturn on a 15% surge in expenses, notably a staggering $125.5 billion wave of policy surrenders.

But here’s what they didn’t say: Why are so many policyholders walking away? And more importantly—what are we, as an industry, doing to stop it?

This isn’t just a financial blip. It’s a signal. And if you’re an advisor, agent, or planner trying to serve clients ethically and effectively in today’s marketplace, you need to be paying attention.

The Quiet Crisis Beneath the Numbers

Yes, income fell. But total revenue actually rose 12%, with premiums and annuity considerations up nearly 20%, and investment income climbing 11%. So where did all that growth go?

Straight out the back door.

The surge in policy surrenders tells us clients are not seeing value. Whether it’s poor fit, bad communication, or outdated product positioning, policyholders are voting with their feet—and it’s costing the industry billions.

If you’re selling annuities or life insurance as static, locked-in solutions with outdated illustrations and one-size-fits-all pitches, you’re part of the problem.

What Financial Professionals Need to Ask Themselves

Let’s flip the mirror. Are we…

• Educating clients on long-term utility vs. short-term liquidity?

• Reviewing policies regularly to adapt to life events and rate shifts?

• Leading with goals-based planning, not just product features?

• Repositioning older policies when surrender might actually be the best option?

• Helping clients understand that properly structured life insurance and annuities are income tools, not expense line items?

If not, this 13% drop could be just the beginning.

Expenses Up. Trust Down?

Let’s talk about that 15% rise in expenses.

On the surface, it’s easy to point to administrative costs, compliance burdens, or rising commissions. But what if a big chunk of that is the cost of poor policy management?

When clients walk away, the carrier doesn’t just lose premium. They’ve already absorbed underwriting, acquisition, and reserve costs. That expense spike could reflect systemic inefficiencies—too much churn, not enough retention.

This is where the advisors who lead with planning, annual reviews, and ethical recommendations shine. Because retaining a well-fitted policyholder for 20 years is infinitely more profitable—for everyone—than cycling through surrender after surrender.

Rebuilding from the Inside Out: What Needs to Change

1. Stop Selling. Start Planning.
Replace "here's the best rate" with "here's how this fits into your retirement income strategy." Advisors who incorporate annuities as guaranteed income solutions and life insurance as estate tools, not tax shelters, build real value.

2. Challenge the Illustration Game.
We’ve all seen it: illustrations with unrealistic crediting assumptions. Clients aren't buying them anymore—and regulators are catching up. Use compliant, conservative projections, and emphasize what’s guaranteed. That’s the foundation of trust.

3. Reframe Policy Surrenders.
Don’t treat them as failures. Sometimes surrender is the right move. But frame the conversation. Can we 1035 exchange into a more suitable product? Can we repurpose the cash for LTC or a retirement bridge strategy? Surrender should be strategic, not emotional.

4. Ride the Regulation Wave.
Best Interest regulations aren’t going away. Advisors who embrace transparency, document recommendations, and truly understand product structures (not just sales points) will come out ahead. That means retooling your process to start with client intent—not commission potential.

Bigger Than Profits: Why This Matters

Look, I’m bullish on life insurance and annuities. Always have been. But I’m also critical of an industry that still clings to 1990s sales methods in a world that demands clarity, flexibility, and client-first thinking.

The 13% income drop isn’t just an accounting issue. It’s a wake-up call. The value proposition of these products must evolve—or the market will evolve without them.

Final Word: From Decline to Redesign

This isn’t a doom-and-gloom post. It’s an invitation.

We can either keep selling static solutions in a dynamic world—or we can step into the advisor role clients actually need: planner, educator, protector.

Let’s fix the cracks before the foundation weakens further. Let’s build policies that adapt. And let’s lead with the kind of integrity that makes clients not just stay—but refer.

Because a 13% drop isn’t the story. How we respond to it is.

Call to Action:

If you’re ready to move beyond old models and elevate your practice, let’s talk. Subscribe for more actionable insights—or drop a question in the comments. Your clients deserve better. So does this industry. And together, we can build it.