The use of medical and lifestyle data to underwrite life expectancy is - PDF document

1 The use of medical and lifestyle data to
The use of medical and lifestyle data to underwrite life expectancy is not new.

2 It has been common for over 10 years wit
It has been common for over 10 years within the retail annuity market with hundr

3 eds of thousands of retail annuities pur
eds of thousands of retail annuities purchased by consumers on this basis. The u

4 se of medical and lifestyle data to help
se of medical and lifestyle data to help price bulk annuities was first introduc

5 ed in 2012 and its usage has grown consi
ed in 2012 and its usage has grown consistently each year since then. In total t

6 here have now been over 50 medically und
here have now been over 50 medically underwritten bulk annuity transactions with

7 around 20% (by num-ber) of all bulk ann
around 20% (by num-ber) of all bulk annuity transactions in 2015 being medicall

8 y underwritten. What this will be lower
y underwritten. What this will be lower. There are many factors which affect c

9 ontract pricing, for example assumed ass
ontract pricing, for example assumed asset returns and profit requirements. All

10 else being equal, however, having access
else being equal, however, having access to more information about life expectan

11 cy could lead to a lower price, but it c
cy could lead to a lower price, but it could also lead approach. It is worth

12 noting that even though some members wil
noting that even though some members will create a material con-centration of ri

13 sk for a scheme, for most Insurers the i
sk for a scheme, for most Insurers the impact is less material in terms of their

14 overall business. This means pricing c
overall business. This means pricing can appear more attractive for the risk r

15 educ-tion achieved. Top slicing is not
educ-tion achieved. Top slicing is not exclusively a medical underwriting solut

16 ion, although it is common for top slice
ion, although it is common for top slice transactions to involve medical underwr

17 iting. As with the traditional bulk annu
iting. As with the traditional bulk annuity market, such changes in assumptions

18 lead to changes in the relative competit
lead to changes in the relative competitiveness of prices between Insurers. Not

19 all Insurers offer MUBA transactions an
all Insurers offer MUBA transactions and it is important to remember that relat

20 ive pricing differences between Insurers
ive pricing differences between Insurers can outweigh the pricing impact of goin

21 g through a medical underwriting exer Da
g through a medical underwriting exer Data Collector asked for only a Targeted G

22 P Report) 5.If any member did not respon
P Report) 5.If any member did not respond to the initial letter, one ÒchaserÓ le

23 tter was issued. Where the member was kn
tter was issued. Where the member was known to a trustee of the pension scheme,

24 an attempt was also made to speak with t
an attempt was also made to speak with the member concerned to encourage their p

25 articipation The Insurer set a minimum
articipation The Insurer set a minimum proportion of liability beneath which th

26 ey decided that the underwriting process
ey decided that the underwriting process was not necessary. As a result, it was

27 agreed that only a small subsec-tion of
agreed that only a small subsec-tion of members would be involved in the underwr

28 iting exercise. The Insurer appointed a
iting exercise. The Insurer appointed a third party to manage the gathering of t

29 he medical data. Differ Regardless of th
he medical data. Differ Regardless of the effort made to tailor the member corre