The US life and annuity industry experienced remarkable growth from 2022 to 2024, with record sales, expanding margins, and strong capital inflows. However, as we moved into 2025, early signs of a slowdown began to emerge. While it might be tempting to assume that 2026 will revert to the favorable conditions of 2024, I believe this assumption could be risky. As we enter 2026, I think there are several strategic areas that Life and Annuity executives should consider. Here are some thoughts:
1. The real challenge: Product architecture
In 2025, rate cuts by the Federal Reserve compressed yields across the industry, making it harder for products to deliver competitive crediting rates. I believe the challenge goes beyond pricing; it’s about product architecture. The forgiving rate environment of 2022-2024 allowed simple products to thrive, but that era seems to be over. I think the focus should shift toward comprehensive retirement income solutions that offer stability, flexibility, and confidence. For example, Goldman Sachs Asset Management’s annual annuity industry survey highlights that nearly 80% of respondents prioritize solutions that address these needs in a constrained yield environment.
2. Building product ecosystems
Rather than viewing products as isolated silos, I believe carriers should think about creating integrated ecosystems that address lifecycle needs. For instance, combining a registered index-linked annuity (RILA) for growth, a deferred income annuity (DIA) for guaranteed income, and a fixed product for liquidity could meet diverse client needs. This approach requires however product integration, unified customer experiences, and tools that enable advisors to construct solutions rather than simply sell products.
3. AI: From experiment to necessity
I think AI has become a critical enabler for the industry. Accenture’s research shows that 93% of life insurers have increased AI investments by at least 5% over the last three years, and 43% plan to increase investments by over 25% in the next three years. Generative AI is already reshaping operations, from underwriting to claims processing, while Agentic AI is poised to make autonomous decisions and actions. I believe the economic impact of AI, such as reducing operating costs and enabling scalable solutions, will be transformative. However, success requires process redesign, unified data infrastructure, decentralized governance, and workforce training.
4. Beyond investment alpha
While private equity has driven sophistication in asset management, I think sustainable advantage now requires combining investment expertise with actuarial innovation, distribution strength, and operational excellence. AI can play a key role in resetting cost curves and driving efficiency.
5. Regulation as partnership
I believe the next wave of regulation will be more consequential, driven by private equity ownership and recent failures. Firms that proactively invest in risk infrastructure, such as stress testing and AI-enabled compliance monitoring, could turn regulation into an advantage rather than a constraint.
6. Focused distribution excellence
Distribution is becoming increasingly segmented, and I think carriers should focus on excelling in specific areas rather than trying to serve all segments equally. For example, dominating RIAs might involve AI tools that analyze advisor client books and generate customized proposals, while engaging carrier agents may require entirely different strategies.
7. Orchestrating capabilities
I believe competitive advantage will come from orchestrating best-in-class capabilities rather than building everything internally. Strategic partnerships can accelerate transformation and innovation, especially as AI evolves.
8. The mass market opportunity
Two-thirds of Boomers are not financially prepared for retirement, and I think this represents an opportunity for product design innovation. AI-powered tools could make sophisticated financial advice accessible at scale, enabling careers to profitably serve customers with modest assets.
Final Thoughts
As you plan for 2026, I believe it’s worth asking: If interest rates remain flat for three years, how can we gain market share? Investing in better products, superior distribution, AI-powered operations, and customer experience transformation will likely be key. The demographic wave and retirement crisis are permanent, and the AI revolution is accelerating. Preparing for these realities will be essential for long-term success.
Many thanks to Ed Sullivan for his valuable contributions to this perspective. Please reach out to us on LinkedIn at either Shay Alon or Ed Sullivan to talk about the future of insurance.
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