View more on these topics

ABI will not force providers to automatically underwrite annuities

Yvonne Braun
Yvonne Braun

The Association of British Insurers refuses to commit to forcing pension providers to automatically underwrite all annuities through its shopping around code of conduct due to concerns it could impact on competition in the market.

Aviva this week called for the industry to incorporate personal underwriting of annuities into the ABI’s code.

An Aviva spokesman says: “Aviva is calling for the industry to automatically underwrite all annuities.

“This would build upon the ABI code of conduct and common quote forms to deliver personally underwritten annuities to all customers so that every retiree receives the income they deserve.”

The ABI’s compulsory code of conduct for providers is designed to increase the number of people who exercise the open market option at retirement.

The code, which will come into effect on 1 March, will require insurers to tell customers that they may be able to get a better annuity rate if they have a medical condition.

However, it does not require providers to offer medically underwritten annuities to all customers and some do not currently have ‘enhanced’ annuity products.

ABI head of savings and retirement Yvonne Braun says: “We will continually improve the code but specifically on the underwriting process we have to be careful not to get into competition territory because that would be illegal.

“We expect more providers to move towards individual underwriting anyway as a result of the EU gender directive.”

Legal & General pensions strategy director Adrian Boulding says: “The market is moving towards individually underwritten annuities so I do not think the ABI needs to intervene.

“The reality is most people do not reach state pension age without having something wrong with them so personal annuities will become the norm.”

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. David Trenner - Intelligent Pensions 21st February 2013 at 11:20 am

    “Legal & General pensions strategy director Adrian Boulding says: “The market is moving towards individually underwritten annuities so I do not think the ABI needs to intervene.

    “The reality is most people do not reach state pension age without having something wrong with them so personal annuities will become the norm.”

    And in the meantime keep ripping off loyal customers!!

  2. Not necessarily.

    There is currently a line between non-underwritten and underwritten annuities. The first assumes some form of “lifestyling” – the customer may not be ill now, but a view is taken on the likelihood of them developing an illness / dying earlier as a result of lifestyle. This can return a shorter life expectancy than an underwritten case for someone with a very mild complaint.

    In addition, either some very expensive IT investments need to be made across the market (in order to keep underwriting costs down), or the costs of underwriting every case will be prohibitive. The charges against the personally-underwritten product would erase most of the benefit of setting the thing up in the first place.

  3. For both providers and intermediaries alike, the additional work and cost burden of underwriting all annuity applications individually would be colossal and not remotely proportionate to the benefits it would achieve.

    I see no rational argument against making the OMO the default option as retirement approaches, though, and a brightly coloured flyer highlighting this should be the single most prominent element of all pre-retirement packs issued to policyholders.

Leave a comment