Enhanced/impaired annuities – what process will get the best deal for the client and the adviser? Undoubtedly, the enhanced annuity market has come a long way in a short space of time. No longer is it a niche product only offered by specialist providers. It is now firmly a mainstream product, with many of the big players also taking an active role in prom-oting the potential benefits to be gained by the client with an enhanced annuity.
A question being asked, though, is whether or not the current sales and advice process for an enhanced annuity is a barrier and may be resulting in many consumers or advisers not bothering to put in the effort? Behind the scenes, there is a lot of work going on to try and answer this question and hopefully put in place the changes needed to ensure that this is not a reason for missing out on potential income gains.
In recent times, the provision of underwritten rates at the initial comparison stage will certainly have played a pivotal role in raising awareness and helping to bring this product into the mainstream.
The level of collaboration and cooperation across the providers should be commended as this has resulted in a common set of under-writing questions that will be accepted by all providers as the basis upon which to provide a guaranteed quote.
Prior to this, the adviser or client would have had to complete a providerspecific questionnaire which certainly would have created a barrier when considering rates from more than one or two companies.
The most common route for sourcing a guaranteed enhanced annuity quote is via the common quotation request form, a paper form, part of which is intended to be completed by the client and the rest to be completed by the adviser. The completed form is then faxed, emailed or posted to the nominated providers, with the resultant rate and corresponding illustration then returned by each prov-ider by fax, email or post as appropriate.
Given the manual nature of the process above and the problems created for the adviser in trying to manage the inbound responses, it is not hard to see that for some advisers this might be a process which causes frustration and unn-ecessary delays and therefore a process which they don’t want to repeat too often.
Ross: Not only is it difficult for advisers to administer and resource the common quote form, the providers themselves also have to maintain a small army of staff to service these quotes and deal with missing or incomprehensible data
The common quote form though does have its supporters and many advisers will take confidence in knowing that the quote has received an element of human verification.
Providers have recognised that the common quote form is probably not sustainable in its current format. Not only is it difficult for advisers to administer and resource, the providers themselves also have to maintain a small army of staff to service these quotes and deal with missing or incomprehensible data.
To help solve the problem, most of the enhanced providers have been investing in their e-capability for the provision of real-time guaranteed enhanced rates via the portals. The question this poses now is which is the best process ensuring the best deal for the client and the adviser?
Getting the best deal
Research would seem to indicate that many advisers are wary about trusting the rates provided through portals and this poses a problem for the industry.
A lot of investment has gone into the development of electronic services, particularly in the area of underwritten quotes, and unless there is strong evidence showing that these services are being used, then it will be difficult to justify a business case for further investment in these services.
This situation is very reminiscent of the protection market in the early days of real-time rates. Advisers were happy to use portals for comparison quotes but in most instances were still going directly to the providers for the final quote to ensure they had the correct premium.
It took time for advisers to trust the rates on the portal and realise that the portal systems are communicating with the same quote engines as the provider extranets or call centres and therefore getting the same result.
The annuity market has leapfrogged the protection market by offering underwritten rates at comparison quote stage and this is something that advisers will still be adjusting to. The important thing is for providers to ensure that their processes are producing the same rates via the manual route as would be obtained via the electronic route.
The annuity market has leapfrogged the protection market by offering underwritten rates at comparison quote stage and this is something that advisers will still be adjusting to
If this is not happening, then adoption of e-services will always struggle.
One area being looked at is the content of the common quote form. At the moment, it is questionable how far an electronic system can go in trying to e-enable the full form. For example, no electronic underwriting system can cope with free text boxes.
The form itself has undergone a number of changes since its launch and to expect electronic systems to constantly keep up with these changes is unrealistic. The underwriting community needs to be aware of this and as much as they would like more and more information they need to appreciate that each change they request will be to the detriment of the efforts of their e-commerce teams and the targets set for e-adoption and reducing manual quotes.
More consumers are carrying out research through the use of online quote tools and the challenge facing the enhanced annuity market is how far to go with the question set on a consumer-facing service?
The conundrum is how do you ask enough information to demonstrate that the consumer could qualify for an enhanced rate but not require them to fill in too much information where they may get turned off?
This is an area where there will undoubtedly be a range of different offerings and it will be interesting to see which will demonstrate most success in achieving the end result of promoting the availability of enhanced rates.
In these times, everyone is looking for efficiencies, particularly in the annuities market, where the margins are very tight for advisers and providers alike.
Processes which are highly integrated are the only real way of delivering these efficiencies. The industry therefore cannot afford to stop looking at ways to improve the electronic process.
Without doubt, e-enabled quotes will grow in popularity as speed of response, low-cost and electronic validation are vitally important (as with protection products). The unanswered question is how long it takes for this to become the norm for enhanced annuities.