Although the ABI has taken a few small steps forward, it appears a sharp prod from the regulator will be required to push insurers towards meaningful annuity reform.
In the wake of the FCA’s highly critical thematic review into the annuity market, the insurer trade body this week announced some additions to its Retirement Choices Code.
By next summer, members will have to ensure every customer has a conversation with their provider or an impartial advice or guidance service about their retirement options.
However, this leaves the door open for insurers to continue to push their own products when they may not be in the interests of the consumer. It is hard to see how insurers can be trusted in such situations and it is likely that a much more dramatic intervention is required to ensure better outcomes.
For instance, Labour is calling for all savers to be referred to an independent source of advice or guidance about their retirement options. This goes further than the ABI’s code and is more likely to address the FCA’s concerns about a “disorderly” market which allows too many people to miss out on better deals by not shopping around.
Such a move would have to be made alongside a strengthening of the annuity intermediary market. A national quality kitemark, suggested recently by Annuity Direct chairman Alan Higham, could fit the bill.
The ABI’s code will also ensure all customers are offered a comparison of annuity quotes available to them while insurers will make sure savers can provide information about health and lifestyle which can be used consistently across all providers when shopping around. Again, these are small steps in the right direction but are unlikely to go far enough.
For instance, there is no detail on whether the comparison quotes will be live and personalised to the individual’s situation, or just general examples, or if the health and lifestyle questionnaires will be detailed and deep enough to ensure entitlement to an enhanced deal is flagged up.
The ABI has shuffled slightly in response to the FCA’s concerns but it is hard not to be left with the impression that the trade body has done the minimum required to pay lip service to the regulator’s findings. If insurers are not prepared to grasp the nettle, it will be left to the FCA to drag them towards the reforms required to ensure consumers get a better deal.