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L&G delivers postcode plan for annuities

Legal & General is to use customer postcodes as an additional risk factor when quoting for annuity business, despite commentators claim the move is a publicity stunt.

L&G says postcodes will be used as one of a number of risk factors for customers taking out conventional non-profit annuities, following its pilot study with Hargreaves Lansdown.

Clients living in certain areas could get an increased annuity rate above L&G’s standard rate.

The insurer says this is the next step in increased pricing sophistication in the conventional annuity market.

But when the pilot study was originally announced, it was slammed for discriminating against customers living in poorer areas, Norwest Consultants principal Harry Katz branded it as a publicity stunt that will provide little difference to clients.

Annuity Direct managing director Stuart Bayliss says: “You cannot get away from the fact that those in poorer areas will get less. It is a patronising gesture to the man from Glasgow and just as patronising to the man from Guildford. They are bottling out from a real challenge.”

Legal & General managing director of annuities business Simon Gadd says: “Using other indicators rather than just age and gender to assess life expectancy is a natural evolution for the individual pension annuity market. We view postcode rating as just the start and we will be exploring other methods of more accurately assessing life expectancy in the future.”

Hargreaves Lansdown head of pensions research Tom McPhail says: “The current system of underwriting the majority of annuities that are purchased is just on the basis of age and gender.

“This is out of date and grossly unfair to the poorest groups in society. There has been some negative com-ment made about the accuracy of applying postcodes but Legal & General has the data, experience and expertise to support this development.”


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