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Providers consider annuity underwriting bureau launch

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A group of pension providers and reinsurers are considering launching an annuity underwriting bureau which would allow consumers to gain accurate medical information before they shop around for a retirement income product.

Industry trade body Origo has completed a feasibility study into developing a central body, called the Annuity Medical Bureau, which would collect health and lifestyle information from consumers.

People could use this information when they are shopping around for an annuity.

The idea has been developed by five providers, including Legal & General, and three reinsurers.

L&G head of annuity product development Tim Gosden (pictured) says: “There is a group of providers and reinsurers that has put together a feasibility study for a medical underwriting bureau. The study is complete and we now need to decide whether to go ahead with it or not.

“The objective of the bureau would be to give consumers the opportunity to give optimal medical and lifestyle information about themselves so when they start off their journey to shop around, they are armed with the best information.”

Gosden says the bureau would be complementary to industry efforts to increase the number of people who shop around at retirement.

He says: “Much of the infrastructure is there already so it would be straightforward to implement, although cost is always going to be a factor. The next stage is getting all of the providers on board because everybody needs to join in to make this work.”

Evolve Financial Planning director Jason Witcombe says: “Annuities are moving towards being individually underwritten, so if that process can be centralised and includes all the big providers then it would be a good thing for consumers.”

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. Whilst I can understand the benefits here to the providers, I worry that reducing risk will have an adverse effect on the market for the majority. Annuity rates benefit from mortality surplus, but enhancing the rates for more impaired lives will reduce this surplus, to the further detriment of the unimpaired lives. Current low rates are already a huge disincentive to save into pensions, and this will only make matters worse.

  2. This appears to be an excellent idea which should help to streamline the At Retirement advice process to the benefit of adviser and consumer alike.
    Let us hope that all providers do, indeed, sign up to it.

  3. So customers who could benefit from higher annuities due to their expected life expectancy shouldn’t have one to pay for healthy lives? That feels like backward logic to me.

  4. Whilst I understand your logic Gavin, the basic principle of insurance is ‘using the good fortune of the many to provide for the misfortune of the few’. If underwriting became so accurate that clients knew that there was very little risk, they would not buy cover. There always has to be an element of chance to make the market work, and all that I am saying is that removing a lot of that chance will damage the market.

  5. Any improvement in the At Retirement process is to be welcomed. The central collection of medical data would be helpful. However, annuity providers need to be competitive. To do this they differentiate their pricing. One way is that they ask extra medical questions. So when a client/intermediary submits a quote request, they would have to provide further variations on their details to get the best quote available.

    One of the best innovations the providers and Origo could achieve is the standardisation and improvement to access of ceding pension scheme information. The At retirement advice process timescales are vastly increased due to the massive effort of extracting information on a client’s existing pension scheme. It is usually old fashioned mechanisms to request the data, very long service standards and is frequently inaccurate to the original request.

  6. An interesting idea but insurers and Origo can save themselves lots of money, there is no need to study the viability of such a service as the key infrastructure to deliver consumer benefit from it already exists.

    Avelo put their full CQF enabled online comparison service live 30/9. Consumers can now complete a full CQF application online, the natural evolution of this is for advisers (not providers) to facilitate innovative ways to help consumers understand their mortality and negotiate the most advantageous terms for an annuity. This may well involve advisers engaging medical professionals. Equally iPipeline are well advanced in delivering a competitor offering.

    Insurers have an obvious conflict of interest in such situations and whilst I would applaud Origo’s achievements in delivering accelerated transactional functionality, they should recognise that if they cross over into competing with adviser services their impartiality will be compromised.

    It is only reasonable for Origo to maintain their current monopoly if they remain a provider utility

  7. Origo were formed as a standards agency they now seem to have aspirations to become a software company. If they do this it puts them in direct competition with others already in the market and may mean that the number of organisations prepared to deal with them start to dwindle.

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