AI is transforming the annuity market by enabling personalized plans, optimizing investments, enhancing customer service, detecting fraud and offering 24/7 AI advisors. While AI improves efficiency and accessibility, challenges like overreliance and limited accuracy still persist.
Annuities have existed for thousands of years, with historical evidence suggesting they were used in ancient Egypt and the Roman Empire. These financial instruments have been modified throughout history, and artificial intelligence can lead to more changes in 2025. AI is poised to impact annuities in the following ways.
Enhanced Personalization
Each consumer has different financial goals, which makes finding a one-size-fits-all annuity impossible. Artificial intelligence can offer more personalization and help consumers find annuities that align with their objectives.
Consumers can find annuities that match their risk tolerance. AI can suggest the best add-ons that match their financial goals and may make it possible for annuity issuers to provide additional choices.
Enhanced personalization doesn’t help only consumers; it also helps businesses. Companies that offer personalized products and experiences can increase the likelihood of consumers doing business with them and referring their friends. Annuity issuers can end up with higher conversion rates.
Optimized Investment Strategies
Some annuities offer fixed payments based on how much consumers put in, while others allocate consumers’ money among investment portfolios. These variable annuities can provide higher returns if the investments perform well.
Artificial intelligence can assist portfolio managers and help them make better decisions with the money that consumers entrust to them. The technology can also lead to a wider range of variable annuities, with some offering the potential for higher returns in exchange for additional risk. AI gives consumers more data points that they can use to increase an annuity’s value.
Portfolio managers can also use algorithms to guide their trades and investments. Robo-advisors have taken off at many brokerage firms, including Vanguard, Fidelity and Schwab. Incorporating robo-advisors and algorithmic trading into annuities can lead to higher returns and better real-time decision-making.
Around-the-Clock Customer Service
Annuity companies can provide better customer service through artificial intelligence. A chatbot can handle basic questions and provide quick resources. Any questions the chatbot cannot address can go to a customer support representative.
A better customer support experience will make consumers happier. Some customer service tickets will be from consumers who intend to buy an annuity but want to clarify a few final details. Answering these tickets properly is essential for annuity issuers, and AI can help.
AI in customer service can benefit consumers and help annuity issuers boost their profit margins and productivity. Artificial intelligence can handle repetitive questions and save time, and this benefit stretches well beyond customer service. Some annuity firms may decide to translate some of those savings into better rates.
AI Advising
While human advisors will always have more value due to their personalization and ability to dive into granular topics, more people may turn to artificial intelligence. AI advisors can offer financial insights based on a user’s prompts. For instance, a consumer can tell the AI advisor about their risk tolerance and financial goals. With that information, it can offer a selection of annuities that make the most sense.
AI advisors can do more than recommend products; they can also provide tips on how to manage your finances and what to do in your current financial situation. AI advisors are evolving, and they are cheaper than their human counterparts. Lower fees allow you to keep more of your returns instead of handing them to a financial advisor.
Furthermore, AI advisors are available 24/7. Consumers can receive advice whenever they need it instead of waiting for a human advisor to jump on the phone or respond to an email.
Fraud Detection
Cyberattacks continue to increase, but hackers aren’t the only ones who are getting smarter. Artificial intelligence can help with fraud detection and prevention in many industries, including annuities. It can detect outliers in consumer behavior and conduct background research on each consumer.
AI can protect annuity issuers and their customers from fraud. The technology can read large datasets and detect irregularities much more quickly than an individual can. This technology helps annuity issuers become more efficient, but a mix of false positives and negatives warrants hiring someone who will supervise AI’s results.
The Advantages of AI in the Annuity Market
Artificial intelligence enables better consumer experiences, more efficient business operations and revenue growth. Annuity issuers can provide consumers with superior products and a personalized experience that increases conversion rates.
The technology will continue to evolve and can minimize the need for people to perform mundane tasks. AI can act as the ultimate assistant and give customer support representatives time to answer more complex questions instead of the basics.
Customers can access AI financial advisors, allowing them to save money compared to working with a human advisor. AI can provide personalized recommendations based on prompts. Consumers can also more easily compare financial products such as annuities and decide which is best.
The Disadvantages of AI in the Annuity Market
While artificial intelligence has many advantages, its primary drawback is the potential for overreliance on the technology. AI tools can produce inaccurate data and false positives. Some people may also want to chat with a representative immediately instead of dealing with an AI chatbot.
Consumers will still need someone to look at and interpret AI’s data. Artificial intelligence also has to earn widespread acceptance before more people use it. While the technology has made strides on that front, not everyone trusts or understands how to use it.
Although AI financial advisors are good, they don’t replace human advisors. Artificial intelligence tools make recommendations based on their programmed outputs. They may not have enough programmed outputs to answer detailed financial questions or offer the right annuity for a consumer’s needs. In these cases, speaking with a financial advisor instead of an AI chatbot can yield better results.
Editor Norah Layne contributed to this article.