Milliman Study: Rising VA Surrenders Reflect Market Shifts
New research from global consulting firm Milliman shows a sharp change in variable annuity policyholder behavior, particularly among contracts with guaranteed living withdrawal benefits. According to Milliman’s 2025 Variable Annuity Industry Experience Studies which covered 23 insurers and 110 million contract-years, surrender rates on GLWB contracts more than doubled from 2022 through 2024. At the same time, the rate of GLWB income activation rose about 20% compared to the previous two years.
Behavioral Shifts Driven by Rates
Milliman consultant Ben Johnson noted that policyholders may be replacing older VA GLWBs with alternative annuity products, particularly fixed indexed annuities offering generous premium bonuses exceeding 20%. These incentives can help offset surrender charges and appeal to clients seeking higher credit potential in a higher-rate environment. The data also shows surrender rates increasing even during periods when surrender charges apply, breaking from historical norms. Contracts that are “at the money” or “moderately in the money” are seeing the largest uptick, while those deep in the money remain largely stable.
Distribution Dynamics
Although variable annuities are typically distributed through fiduciary channels and FIAs through independent agents and IMOs, Milliman sees signs of overlap. Advisors and clients alike appear to be reevaluating older income guarantees in favor of newer products with stronger rates and bonuses.
Why It Matters for Advisors
For advisors managing legacy VA business, this trend signals a broader migration from variable to fixed indexed solutions. While replacements can be justified in certain scenarios, advisors should carefully evaluate:
- Lost income benefits and potential tax consequences from surrenders
- Real versus perceived value of new product bonuses
- Suitability and compliance with replacement recommendations
Higher interest rates and richer FIA incentives are reshaping client behavior and carriers’ balance sheets along with it. Understanding these surrender trends is key to advising clients on whether holding or replacing existing annuity contracts aligns best with their long-term income goals. Reach out to one of our annuity experts here at Wholehan to see how we can help you!