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Fat premiums for thin people

Skandia is rewording its client annuity letters to stress the open market option rather than its tie-up with L&G following IFA criticism.

The company signed an annuity deal with L&G this year. On letters sent out to IFAs with clients nearing retirement, the first option was to complete an acceptance form and return it to Skandia which then arranges the annuity with Legal & General and get 2 per cent commission from L&G with the IFA getting nothing.

Alternatively, Skandia invites the client to buy an L&G annuity via the IFA or use the open market optionQS Financial director Graham Bowser complained to Money Marketing, saying that Skandia was taking commission for the work done by the IFA if its clients took the first option. Skandia rejected criticism that it was pocketing IFA commission but accepted that the letters were badly worded.

Skandia pensions marketing director Nick Bladen says letters sent to advisers will now only outline the Omo, while letters sent to clients will outline the Omo first and then the L&G tie-up.

Bladen says: “The letters were misleading and the annuity with L&G should not have been included in letters to advisers.”

People who are underweight can be hit with much higher premiums and stricter underwriting on life and critical-illness cover.

Advisers are warning people to be aware that if they have a body mass index of under 16 they are likely to face extra charges when applying for cover and could face tougher underwriting terms written into the contract.

Premiums are usually higher for overweight consumers, with a BMI of 30 or over but many people are unaware that they may face higher charges if insurers class them as underweight because it can indicate eating disorders or other health problems.

Hargreaves Lansdown protection research manager Jonathan Briggs says: “It is not just overweight people who are subject to higher premiums. Someone like a fashion model may have to pay higher premiums on a life insurance policy if her BMI is low.”

Lifesearch head of protection strategy Kevin Carr says: “Being underweight is equally as unhealthy as being overweight in some cases and if you have a BMI of under 16, then your premiums could increase by 50 per cent or more depending on the circumstances.”

A healthy body mass index is generally considered by medical opinion to be in the range of 19-24 for people aged between 18 and 34 and 19-26 for people over 35. A person with a BMI below 19 is considered underweight while an index of up to 30 is considered overweight and over 30 is a risk of significantly increased mortality. Information on calculating BMI can be found on the internet at www2.netdoctor. co.uk/health_advice/facts/bodymassindex.htm

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