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.”
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