For decades, annuities have been the reliable backbone of retirement planning, a trusted part of retirement income solutions that promise predictable income and long-term security. Yet, despite growing personal wealth and longer life expectancies, annuities have lagged behind other investment vehicles. According to the LIMRA U.S. Individual Annuity Sales Survey 2024, only 12% of retirees hold annuities, even though most would benefit from the protection they offer.
So, why haven’t annuities kept pace? The answer isn’t lack of need — it’s a combination of perception, complexity, and product rigidity. Simply put, annuities haven’t evolved with the people they are meant to serve.
What’s Holding Annuities Back from Becoming Truly Personalized?
If annuities offer such strong income security and long-term stability, why haven’t they taken off? The truth is, people don’t feel connected to them. Here’s why:
Lack of Personalization
We live in an age of hyper-customization. Your sneakers, playlists, and even coffee orders are personalized. Yet annuities remain rigid, one-size-fits-all products that freeze your options the moment you buy them. They don’t evolve with your life, goals, or health. It’s no wonder that 70% of customers say they’d be more likely to buy an annuity if it were tailored to their needs. The demand for personalization is clear—the industry just hasn’t caught up.
Overlooking the Emotional Side of Retirement
Retirement planning is a deeply emotional process. People worry about outliving their savings, losing their sense of purpose, or leaving a legacy. Too often, annuities are sold as technical instruments rather than emotional solutions. With AI-driven insights and empathy, advisors can transform that experience, creating personalized retirement playlists that balance growth, security, and flexibility around an individual’s life story.
Financial Literacy & Generational Language Gaps
Annuities are complex: riders, fees, tax rules, and fine print can overwhelm even the financially savvy. Financial literacy tends to decline by about 1% each year among older adults, and today, only 12% of U.S. retirees own annuities. Part of the problem? The language.
What sounds reassuring to one generation—“Guaranteed Lifetime Withdrawal Benefit”—can feel cold and bureaucratic to another. Gen Z and millennials prefer clarity, digital visibility, and plain language, favoring terms like “income tracking dashboard.” Simplifying communication isn’t just about improving understanding; it’s about building trust.
The Perception of High Fees and Low Value
Annuities are often viewed as expensive and opaque, with annual fees running 2–4%. For digital-native generations used to transparent pricing, that’s a dealbreaker. To shift perceptions, insurers need to reinvent the experience:
- Transparent dashboards showing every dollar and its purpose.
- Modular designs where buyers pay only for features they want.
- Smart comparison tools that highlight how annuities stack up against other investment options.
With these changes, annuities can move from being misunderstood financial products to becoming adaptive, intelligent tools that grow with the customer.
The Market Has Never Been More Ready
The irony is that timing has never been better. Rates are finally favorable. Longevity is rising. Market volatility has made “guaranteed income” sound good again. Every signal points to opportunity.
But the opportunity isn’t just financial — it’s strategic. This is the moment for insurers to rebuild trust, reconnect with customers, and reassert relevance. To do that, the product has to evolve from a static contract to a dynamic life solution.
Reimagining the Annuity with AI
Artificial intelligence is transforming every stage of the personalized annuities lifecycle—from product design to engagement. It’s not just about automation anymore; it’s about imagination.
Here’s how that transformation is taking shape:
Hyper-personalized Product Design
Insurers today sit on vast reservoirs of data: policy histories, digital interactions, contact center logs, and behavioral insights that reveal how customers spend, save, and plan. AI and analytics bring this data to life, uncovering patterns about each customer’s lifestyle, values, risk appetite, and retirement readiness.
Using these insights, insurers can design annuities tailored to:
- Individual risk tolerance and return expectations
- Health-adjusted life expectancy
- Lifestyle and income goals
- Dynamic liquidity needs
The result: products that feel intuitive and individualized, built around life, not just longevity.
Dynamic Income Modeling and Portfolio Adjustments
Retirement isn’t static — and annuities shouldn’t be either. AI can simulate a range of scenarios, factoring in market volatility, inflation, healthcare costs, and personal spending habits. These simulations help advisors and customers visualize how an annuity performs under different life and market conditions.
More importantly, AI can trigger automated portfolio and benefit adjustments as circumstances evolve, reallocating assets, optimizing riders, or recalibrating payouts in real time.
For example, payouts can adapt dynamically when:
- A customer’s health or spending patterns change.
- Inflation or investment performance alters projected income.
- Life goals shift, such as early retirement or caregiving needs.
Instead of fixed, scheduled payments, annuitants receive living income streams that evolve with their reality.
Intelligent Recommendations
AI now extends beyond operations into advice orchestration. By analyzing customer conversations, emails, and service interactions, AI models can detect intent, concerns, and life triggers, predicting what each customer might need next.
If, for instance, an annuitant expresses concern about rising healthcare costs, the system can automatically suggest adding a long-term care (LTC) rider or recommend complementary health coverage, seamlessly during the same interaction.
This shift transforms every touchpoint into a personalized engagement opportunity, turning reactive service into proactive, value-driven advisory.
AI is not just modernizing annuities; it’s humanizing them. By aligning financial security with emotional and lifestyle realities, insurers can deliver what customers truly seek: confidence, flexibility, and peace of mind through every life stage.
Current Roadblocks to AI-driven Personalized Annuities
The technology is ready. The intent is clear. Yet, the annuity industry remains in transition, constrained not by imagination but by infrastructure, integration, and regulation. Here are the key barriers standing in the way of fully personalized, AI-powered annuity ecosystems:
Fragmented Data and Integration Challenges
Most insurers are sitting on vast, underutilized data assets scattered across legacy policy administration systems, underwriting records, and CRM platforms. This fragmentation prevents the creation of a unified customer view — the foundation of effective AI. Poor data quality, inconsistent formats, and limited interoperability make it difficult to train models that can scale or deliver accurate, actionable insights.
Product Complexity and Legacy Constructs
Annuities are inherently intricate — with multiple riders, fee structures, and tax implications. This complexity makes it difficult to modularize or standardize product components for AI-driven personalization. For many insurers, deeply embedded legacy rules and manual processes further slow innovation and experimentation.
Data Privacy and Customer Trust
AI-led personalization relies on sensitive data, including financial histories, behavioral insights, and health information. Without stringent governance, transparency, and consent frameworks, even well-intentioned data use can raise red flags. Customers expect privacy by design. Any perception of misuse or bias can erode trust — the cornerstone of the annuity business.
Regulatory and Fiduciary Constraints
Current regulations around suitability, disclosure, and fiduciary responsibility were written for human advisors, not intelligent systems. AI recommendations often lack explainability, making it difficult to demonstrate compliance with “best interest” standards. Moreover, strict rules on data access, consent, and storage create friction between innovation and accountability.
The barriers are not about whether AI can transform annuities, but how the industry can adapt to use it responsibly, balancing innovation with trust, compliance, and customer confidence.
The Way Forward: Build Your Own Annuity (BYOA)
The traditional annuity landscape has long been defined by rigidity, fixed product structures, disconnected data, and opaque policy language. But the industry is now moving toward a more flexible personalized Build Your Own Annuity (BYOA) model, an approach that blends data intelligence, modular annuity design, and AI-driven guidance to put the customer in control.
This shift aligns perfectly with the broader consumer mindset: if people can personalize everything from their cars to their streaming playlists, why shouldn’t they be able to tailor their retirement income solutions too? BYOA makes that vision real, turning static annuities into dynamic, living products that evolve with each policyholder’s life.
How Hexaware is Powering This Transformation
At Hexaware, we’re helping insurers bring the BYOA model to life, turning aspiration into execution.
Our approach begins with unifying fragmented data sources—including policyholder, claims, CRM, and behavioral insights—to create a holistic, 360-degree customer view. From there, we apply AI, machine learning, and automation to:
- Reimagine annuity design with modular, plug-and-play structures.
- Enable AI-driven personalization through predictive modeling of goals, life events, and risk tolerance.
- Simplify communication using conversational AI that translates complex terms into human language.
- Ensure transparency and compliance through explainable AI frameworks that meet regulatory standards.
- Integrate seamlessly with legacy systems through APIs and digital middleware, modernizing without disruption.
With these capabilities, Hexaware helps insurers deliver personalized annuities that are dynamic, compliant, and customer-centric, built for the digital age. This is annuity modernization in action: bringing data, intelligence, and empathy together to deliver true retirement income solutions for the modern world.
What’s Next for the Annuity Ecosystem
As the market evolves, three trends will define the next growth horizon:
Embedded Annuities in Retirement Platforms
Expect to see annuities integrated directly into digital wealth ecosystems, enabling real-time portfolio management and annuity selection within broader financial planning apps.
Agentic AI for Continuous Decisioning
AI agents will take on higher-order tasks, like dynamically adjusting recommendations based on market movements or customer behavior, reducing advisor workload while improving accuracy.
Cloud-Native Policy Ecosystems
Carriers will migrate from product-centric systems to flexible, API-driven digital annuities platforms that connect distribution, servicing, and compliance in real time.
Conclusion
For too long, annuities have been stuck in the past with rigid, one-size-fits-all financial products that no longer reflect the evolving retirement planning needs of modern customers. Today’s more informed and tech-savvy generations seek financial solutions that are not built for the masses, but rather those that reflect their unique life journeys, risk appetites, and financial aspirations. Personalized annuities are not a futuristic concept anymore. They will soon be the new standard.
The question is not whether the insurance industry will evolve from static annuity products but how quickly it can adapt. Sure, there are hurdles – aging systems, product complexity, and regulatory constraints. But so is the opportunity.
If we build BYOA annuities that align with people’s life events, socio-economic trends, and pair AI intelligence with human empathy, we will not just modernize annuities; we will redefine retirement planning, from transactional to transformational, actuarial assumptions to deeply personal financial solutions.
At Hexaware, we believe the time for this shift is now. Let’s build the next generation of annuities: flexible, transparent, and deeply personal. Explore how Hexaware can help you reimagine personalized annuities and retirement income solutions.
