Friends Life has launched an annuity underwritten on savers' lifestyles, rather than specific medical conditions, in a bid to compete on the open market.
The Friends Lifestyle Annuity is part of the insurers' plan to enter the at-retirement market, which it has been developing since its restructure from Friends Provident and Axa (IFAOnline, 22 November 2011).
Previously, Friends Life only offered annuities to existing defined contribution (DC) plan customers, of whom only 75% bought open market option (OMO) products.
It now intends to compete with standard rate annuity providers, offering rates tailored for people who do not have specific medical conditions, but whose lifestyle may affect their life expectancy.
Friends Life retirement income director David Still said the enhanced annuity market has not yet reached maturity, but that the insurer believes shopping around for enhanced rates will become the norm.
He said the market for people with medical conditions such as heart disease has been "fairly well-established" by providers such as Partnership and Just Retirement, and that the product does not intend to compete there.
However, he added that the market based on underwriting for people who used to smoke, have high cholesterol, high body mass index (BMI), a family history of life-threatening illness, or are likely to develop a condition related to their occupation, has not been fully explored.
Still said the product takes many of the underwriting aspects used in the bulk annuity market and applies them to individuals.
"It's a subtler message. We are not targeting people with significant medical problems or proposing a doubling of income, but offering perhaps a 5-15% enhancement," he said.
Still said the product was offered to internal Friends Life customers around 18 months ago and has been refined since then.
It is available via the IRESS Exchange, The Open Market Annuity Service (TOMAS) and iPipeline's Assureweb.
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