Money Marketing revealed in June that Canada Life was working to join Legal & General, Aviva and Prudential in the postcode pricing space by the fourth quarter of this year.
Canada Life and Aegon have been the only major annuity providers not to price their annuities based on customers’ postcodes.
Experts claim that given L&G, Aviva and Prudential control more than 40 per cent of the annuity market, Canada Life and Aegon have been exposing themselves to the significant commercial risk of being left with healthier, less profitable lives.
L&G was the first firm to launch postcode annuities in September 2007. Aviva and Prudential followed last year.
Aegon says it introduced postcode annuity functionality on November 21 but will update its rates on December 12.
Head of individual marketing Gordon Greig says: “The introduction of postcode based annuity rates helps Aegon provide a more appropriate annuity rate to customers better reflecting their individual circumstances. It helps reduce cross subsidies between customers and ensures that all customers get an overall fairer deal.
“We use a range of factors to determine the annuity rates we offer such as age, sex and smoking status and adding postcodes is a natural extension to this as there is a clear link to life expectancy and longevity.”
Canada Life marketing project manager Peter Gould says: “Canada Life does intend to introduce postcode annuities to their range of retirement products. Canada Life will announce to the market as soon as these products are available for IFAs and their clients.”
Annuity Direct chief executive Bob Bullivant says: “Unfortunately, older people who diligently eat healthily, do not smoke, drink in moderation and get plenty of exercise are penalised by the insurance giants.
“That said, the postcode annuity system does work in favour of those living in more deprived areas but I am not so sure these are altruistic, Robin Hood type motives. It is clearly to the advantage of the big insurers to pay more via an annuity for a shorter period of time.
“With Canada Life’s entry to the market we can almost certainly anticipate the vast majority of life firms discriminating by postcode in a similar way. It is only a matter of time.”