Aviva postcode pricing for protection
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The firm already uses the pricing model for annuity business, as do Legal & General and Prudential, but it is the first to pilot this method for pricing protection policies.
The pilot started in May on Aviva's simplified life products with a select number of distributors and it will end once the firm feels it has gathered sufficient data to decide whether to proceed with a full rollout.
Neither L&G nor Prudential say they have any plans to introduce the pricing model for protection.
Aviva protection director Richard Verdin says: "We have been using similar pricing techniques and expertise in house and motor insurance for years and added postcode as a rating factor on our annuities business in the second half of last year.
"All our research tells us that customers want us to recognise their personal circumstances more and this begins to do this. Using more factors helps us price protection more fairly and creates additional value for many customers. It also helps us manage our own risk as a business more accurately."
RGA UK pricing and research actuary Eli Friedwald expects more protection providers to follow in the footsteps of annuity providers and introduce postcode pricing when rating their clients.
He says: "A significant proportion of the market now pays annuity rates dependent on the postcode of the applicant. There is no reason why in theory life offices should not begin to offer premium rates which are also tiered according to socioeconomic group and postcode. The technology is there, there are proven benefits from this and it is not intrusive."
Axxis Financial Planning director Owen Wintersgill says: "Advisers understand annuity postcodes and I do not think there is a huge leap of logic to then apply that to protection."
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