The financial industry is witnessing a surge in the development of customized and proprietary indexes, as firms increasingly seek alternatives to traditional benchmarks like the S&P 500 and the Dow Jones average. These established indexes are often perceived as expensive, outdated, and overly complex. Among the latest to embrace this trend is InsLyft, a leading financial distribution and product innovator, which, in collaboration with Securian Financial, has unveiled the Hindsight Indexed Account.
According to InsLyft, the new methodology aims to bring “clarity and effectiveness” to index product design. “We believe Hindsight has the potential to become the new industry standard, replacing outdated models that limit clients to a single index,” stated Allie Miller, InsLyft’s president. The Hindsight Indexed Account is now available through Securian Financial’s new Eclipse Accumulator II Indexed Universal Life product.
Customized indexes allow firms to tailor their offerings in alignment with specific investment philosophies, thematic focuses, and risk appetites. As Harris, one of the partners involved in the project, explained, “I’ve seen all these complex strategies that carriers were coming out with and all these lowball strategies that nobody understands. Most of the agents don’t understand the products being sold today.”
A Shift Away From Traditional Indices
The movement away from conventional indices is fueled by advancements in technology and data analysis, prompting firms to develop proprietary indexes that better represent their unique perspectives, investment approaches, and targeted client segments. The intention is to move away from broad, standardized benchmarks that may not accurately reflect the fund’s exposure. A custom index provides a more precise match to the investment mandate, thereby improving performance evaluation. Designing a proprietary index also allows firms to distinguish themselves in a competitive market because it can serve as a marketing tool to highlight their distinctive approach to portfolio construction or thematic investing. Moreover, according to Harris, “About 99% of the carriers only use the S&P as their benchmark. So, if you did that, you would have come in second 90% of the time over the last 25 years because the NASDAQ’s been the number one performing index.”
Several major companies, including BlackRock and State Street Global Advisors, have adopted customized indexes. These companies crafted proprietary ESG and climate-focused indexes for their sustainable investing products, Goldman Sachs created custom indexes to support its factor-based investing and thematic products. Additionally, JP Morgan Asset Management utilizes custom indexes for structured products and annuities, especially those tied to volatility-managed strategies.
Miller noted that InsLyft’s Hindsight index has historical roots. The index was developed about 15 years ago by Anthony Ginsberg, of GinsGlobal Index Funds, a pioneer in index-linked investment products. Though Ginsberg utilized it with companies such as Zurich, AIG, and American General, it has not been actively used for years.
Three Reference Indices Utilized
The Hindsight Indexed Account offers policyholders enhanced diversification by incorporating three reference indices: the S&P 500, NASDAQ 100, and Russell 2000. “The Hindsight methodology means clients and financial professionals won’t need to guess at allocations for premiums,” Ginsberg said. “The unique crediting method weights the highest performing index at 60%, the second highest at 40% and the third at 0%.” The retrospective approach to allocating and pricing is designed to be a more straightforward method for both agents and clients.
Miller explained the system: “The sixty-forty-zero means that whatever index comes in first you’re gonna get 60% of the gains, whatever one comes in the second you’re gonna get 40% of the gains, and whatever comes in third you’re gonna get zero all up to the cap of the carrier. So the reason why it works so well is when you apply a cap and utilize this design, and why it’s good for the agent and why it’s good for the client, it hits the cap about 30% more frequently than a standard annual point-to-point option, and it avoids hitting zero about 35% more frequently.”
Miller added that the Hindsight index’s automatic rebalancing is a key feature. This means that at the end of the year, investors do not have to rebalance. “So, from the suitability and compliance perspective, it’s great. When you get that call from your advisor asking you how you want to rebalance, you have no idea. So this is another worry off the table.”
