Norwich Union believes that it can double the amount of impaired life annuities bought in the UK ann...
Norwich Union believes that it can double the amount of impaired life annuities bought in the UK annuity market and is predicting growth of around £625 million.
Norwich Union figures suggest that the impaired annuity market is being underused by five percent, so is hoping to close the gap with the launch this week of its own impaired annuity product.
Aimed at the over 50's market, NU's impaired life annuity is designed to provide an enhanced level of income to people with a reduced life expectancy due to a serious illness or condition.
Norwich Union predicts that in some cases individuals could receive up to 50 percent extra income a year.
Applicants of the NU impaired life annuity will be asked to complete an extensive questionnaire about their health and medical history, after which Norwich Union will contact the candidate's doctor for a full medical report and the amount of annuity will be calculated from the information provided.
However, this is different to traditional methods, argues Ian Beggs, spokesman for Norwich Union.
"Standard companies apply the minimum criteria and work out a persons income. Norwich Union assesses each applicant individually we take into account their position before deciding upon an amount."
Commenting on Norwich Union's latest initiative, John Turton, chartered insurer and adviser on pensions at Bestinvest says:
"A worry I have is that Norwich Union will have a desire to use their own medical questionnaire whereas the rest of the nine members in the market have one medical declaration to make sure consumers don't have to complete separate forms for different companies. I hope the Norwich Union join the party because if they don't, it will impair them."
Despite this, Turton does believe Norwich Union will be successful.
"Norwich Union have a good underwriting experience, the bigger the company, the more they can do their own thing and their name awareness will make give it more of an advantage. But they might not be as successful if their annuity rates stay the same, as they may lose out to other annuity providers such as Scottish Widow."
In addition to trying to offer a slightly different product, Norwich Union is also submitting a new "death provision" to the Inland Revenue within the next three months, which NU officials expect to be successful.
This death provision calls for investments to be returned to a next of kin in the event of an investor's death, rather than the current system on annuities which sees remaining investor money left with the insurance company.
John Turton says: "It is not yet clear cut, but it could mean there will returns on death investments, money will come back to you or your kin. The Inland Revenues attitude has softened with the looming pension crisis and the pressure to encourage young people to invest for their retirement."
The Norwich Union is making it clear that there is a large annuity market for people with impairments to get better deals from, and companies are at least trying to expand the market in this area.
The Association of British Insurers has adopted this sort of approach as they are trying to strengthen the industry's code of practice on the sale and marketing of long-term care insurance.
It will now be treated as an equivalent investment contract and will require companies to provide an assessment of each customer's financial needs.
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