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It’s in the post

News that Aviva is piloting postcode pricing in the underwriting of protection products, revealed in last week’s Money Marketing, is a big step forward for the protection industry.

Aviva, Legal & General and Prudential already use the pricing model for annuity business but Aviva is the first to pilot this method for pricing protection policies in the UK.

RGA UK pricing and research actuary Eli Friedwald says now is the time for life offices to look at offering premium rates relative to a policyholder’s postcode.

He says: “The annuity market has moved much faster than the insurance market. That I find to be absolutely striking. The life assurance market on the UK, in terms of term assurance and rating factors, is many years behind and it is quite backward.

“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.”

However, Friedwald says it will work much better as an online direct offering, excluding the IFA.

He says: “I could see it working better with a direct offering than through the IFA market. Working through the internet and getting information means you can analyse at a very deep level. You can have thousands of different ratings structure.”

Pacific Life Re head of protection Alex King agrees. He says: “Postcode pricing, together with using other non-traditional rating factors works better in a tied, bancassurance or direct to customer environment. With the use of portals in the IFA market, advisers expect to get the price they see at outset.

“The practical issues of implementing this in the wider IFA market are likely to outweigh the benefits.”

But Master Adviser IFA Roy McLoughlin says a move towards postcode pricing “worries” him.

He says: “There is natural discrimination in there. If you live in a
not so affluent area what they are effectively saying is tough we only want good addresses.”

Is the move to postcode protection a worrying trend? Share your thoughts by clicking the link below.

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. post code cover
    why not have IFA’s sell this sort of cover we could find the best company for each client .
    Its another typical move to support the villains of the piece ,the banks, who never give good advice but just sell products

  2. Postcode pricing
    We at SelectX have been advocating a more sophisticated approach to protection risk pricing for years. The way term, critical illness and income protection is priced is way behind other types of insurance such as household and motor. But postcode is just a proxy for other risk factors. Using just that together with traditional risk factors is as unfair as the way it’s done now. My guess is that it will take a direct-to-consumer offering to get things moving; innovating in the IFA market just never happens.

  3. POST CODE UNDERWRITING
    WHAT ARE YOU DOING? IF YOU LOOK AT UNDERWRITING AS AT PRESENT, IT BALANCES OUT OVER THE DISTANCE. WHAT DO YOU HOPE TO PROVE? YOU ARE GOING TO ALIIANATE 50% OF YOUR CLIENTS AND LOOSE BUSINESS. ARE YOU GOING MAD?
    JACK MORRIS

    CORPORATE CONSULTANTS

  4. Aviva
    This shows that Aviva is not committed to the IFA market and is merely an extension of TV adverts and paper adverts.

    Why do IFA’s use Aviva??. I think that there may be a human rights issue here of discrimination, what about the guy who lives ina poorer area who looks after his health and fitness.

  5. Postcode underwriting
    I was born under the sound of Bow bells, have a Scottish father and live in the country – how would Aviva assess me?

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