When retirement products miss the mark

In the world of insurance and asset management, sometimes it doesn't pay to be the company with the most revolutionary product. Life insurance and fund family executives recounted their brushes with product failures at the Insured Retirement Institute's annual conference in Chicago on Monday afternoon during a panel entitled “Product Innovation: A Look Ahead.” Back in 2008, BlackRock Inc. and MetLife Inc. teamed up to offer a combination product that would bring lifetime income to retirement plans through the pairing of a target date fund with an income annuity. The hybrid was slugged the LifePath Retirement Income Fund. The product seemed to have everything going for it, particularly as the retirement plan industry's conversation moved from accumulation to providing income in retirement. But it wasn't meant to be, noted Chip Castille, head of defined contribution at BlackRock and a panelist at the IRI conference. “What happened was that the designs were really nice and on-point — it solved problems,” he said. “But the things that were problematic came from an adoption standpoint: It was unclear from the regulatory standpoint.” Plan sponsors were concerned about having safe harbor, or limited liability if they could show they were acting in good faith, should they choose to use the MetLife-BlackRock product. The Labor Department hasn't provided a safe harbor for lifetime income in retirement plans. There were also concerns around communicating the benefits and handling the record keeping, Mr. Castille noted. Essentially, while conversations with prospects were promising, they ultimately did not lead to a sale, he added. “What we learned from that is that the product has to work in today's regulatory environment,” Mr. Castille said. Another product that looked great on the drawing board but hasn't been a big seller is Lincoln National Corp.'s attempt to combine an annuity with a long-term-care rider. “We have a fabulous product that combines life and LTC,” said Brian Kroll, head of annuity solutions at Lincoln and a panelist at the conference. “Wouldn't it be great to have a variable or fixed annuity that can do that?” Indeed, the insurer created such a product and presented it to state regulators, garnering good feedback. Unfortunately, Lincoln got sidetracked during the downturn, and eventually, the regulators ended up changing their minds on the concept, Mr. Kroll said. “I still think it has a place,” Mr. Kroll noted of the product. “Sometimes you are on the bleeding edge.”