Improving annuity pricing with postcodes

Longevitas Ltd has published a timely article in Life and Pensions magazine explores how to use UK postcodes to rate people for longevity risk. Longevitas Ltd expects postcodes to rapidly become a routine underwriting factor for annuities in the UK, along with age, gender and fund size.

Between end-2007 and August 2008 Legal & General, Norwich Union and Prudential have all announced that they will use postcodes for pricing individual annuities. The UK annuity market is now in rapid flux with three of the biggest players changing the way they underwrite longevity risk. Other companies will have to follow suit very quickly to avoid anti-selection

The methodology used here can be applied internationally, even in countries which do not have a postcode system like the UK.