Milliman, a global consulting and actuarial firm, has published its two 2025 Variable Annuity Industry Experience Studies, which indicate a notable increase in surrender rates for variable annuity contracts, even in the presence of surrender charges, since 2022.
The studies delve into policyholder behavior concerning surrender rates and partial withdrawals, with a specific focus on income utilization for guaranteed lifetime withdrawal benefit (GLWB) riders. Data on guaranteed minimum income benefit (GMIB) annuitization experience is also accessible through the Milliman Recon web-tool.
Key findings from Milliman’s latest variable annuity (VA) studies reveal that average surrender rates have increased since 2022 for both GLWB contracts and contracts without living benefits. Contrary to traditional expectations, these surrender rates have risen even during periods when surrender charges apply. Furthermore, GLWB contracts that are at-the-money or moderately in-the-money have exhibited higher surrender rates than previously observed.
These patterns suggest policyholder reactions to the current economic environment, including higher interest rates and the growing appeal of alternative annuity product offerings. Ben Johnson, a consultant with Milliman and co-author of the studies, commented, “The introduction of high premium bonuses and richer GLWB riders attached to fixed indexed annuities, coupled with the recent surge in interest rates, could be prompting VA contract-holders to replace their existing VA with a more attractive alternative. Insurers need to closely track these evolving patterns to understand policyholder risk effectively.”
The studies further demonstrate that surrenders remain sensitive to “moneyness”—defined as the ratio of guarantee value to account value—across all guarantee types. Policyholder persistency is higher when the account value is lower relative to the guarantee value, though even deeply in-the-money contracts with lifetime income benefits continue to experience some level of surrenders.
These comprehensive analyses incorporate seriatim data from 23 companies, encompassing 110 million contract-years of exposure from January 2008 through December 2024.
