Capturing the best possible annuity quotation, using nurse-led assessments

While there hasn’t been much to celebrate about in this environment of higher interest rates, one positive is the resurgence of annuities. From their decline and near extinction following the introduction of greater pension freedoms in 2015, annuities, which provide retirees with a guaranteed income for life, are soaring in popularity amid high interest rates – and are now generating far better returns.

Research by the Association of British Insurers found that sales of annuities were 27 per cent higher in H1 2023 compared to the previous year. Furthermore, annuity comparison quotes on the iPipeline platform hit their highest levels for a decade in Q3 and Q4 2023. Given the path of interest rates so far this year, this demand has only continued.

However, with inflation returning to ‘normal levels’, expectation continues to build that a long-awaited cut to the Bank of England base rate could now be imminent.

With financial advisers looking to lock in competitive annuity rates before any potential change in interest rates, it’s never been as important to have proven, repeatable methods which achieve the highest possible annuity rate for clients.

Nurse-led medical assessments

In a study conducted by our team at MorganAsh, we found that nurse-led medical assessments return a significantly higher annuity rate than those submitted using standard online forms. In 76 per cent of cases, a higher annuity rate was achieved – with a mean uplift of 2.5 per cent, or £225, per year. In fact, many cases saw an increase of 10 per cent or more, while one case in particular saw an uplift of 33 per cent – or nearly £7,000 of extra income per annum.

This study took place between February and May 2024 with two quotes obtained from Aviva, Just, L&G and Canada Life. With rates recorded for each case and both methods, Aviva achieved the greatest difference in average annuity rates at 3.7 per cent.

Hearing clients and answering underwriters

What makes this approach so successful? A key factor is clients having positive interactions with our registered nurses, giving customers the freedom and confidence to disclose information that they may not necessarily volunteer otherwise. Just as important is the nurses being fully aware of the information medical underwriters require – and how this should be recorded and presented. MorganAsh nurses for example are highly experienced and often senior – they are used to talking to customers and obtaining accurate health information.

With the right provider of medical assessments, underwriters are aware of and appreciate the due diligence that has been undertaken and are more likely to trust the data provided. If this is then presented in a format that works best for them, there’s no reason why they wouldn’t be inclined to provide a better rate.

Even with a slight increase in assessment, underwriting and administrative costs, our study found that this approach is still cost-effective. By our maths, and with average life expectancy and the average duration of annuities taken into account, an uplift greater than £10 per annum would be cost-beneficial. This was achieved by 75 per cent of cases in our study.

Answering Consumer Duty

Given the higher returns achieved by annuities, as well as the opportunities available to combine the guarantee of an annuity with the flexibility of drawdown, it is clearly in the best interest of the client to explore this avenue.

In fact, there’s a pretty solid argument to say that with Consumer Duty requiring firms to evidence that they have considered all options, not considering an enhanced annuity at annual review is unlikely to meet the new rules.

Furthermore, studies such as this, and current research, confirm the effectiveness of nurse-based medical assessments in achieving higher annuity quotations – particularly for those retirees with significant and complex health issues. Therefore, if this route is not considered, there’s the possibility that a customer could receive a poor outcome – one that is open to later challenge.

Successful triage

Nonetheless, it can still be challenging for advisers to know when to obtain an annuity quotation and whether to do this online or go more in-depth with a nurse assessment. Software such as MARS (MorganAsh Resilience System) incorporates an annuity triage and uses health data already collected from its consumer vulnerability assessment to make a recommendation on the likelihood of an enhancement, as well as the best course of action.

Not only is it highly efficient to use this health information to triage for other products, it’s a real opportunity to reach out to areas previously underserved and to deliver a broader and better service to clients.