Dunstan Thomas, which has expertise in calculation engines and illustrations systems, has been seeing a rise in interest in offering enhanced annuities since 2003 as providers begin to recognise the potential size of this market.
Chris Read, chairman of Dunstan Thomas, explains the potential of this market:
"The Office of National Statistics 2001 Census records that over a million residents of England and Wales at retirement age (60-79 years old) suffer from a limiting long-term illness which is affecting their health negatively. Thatâs one third of the entire population that could be shopping around for an enhanced annuity right now.
Chris Read continued:
"Currently there arenât too many providers offering enhanced annuities. Those that are, want to roll out a system for calculating and illustrating the enhanced annuity rates for customers fast. Imago:Annuity offers this facility and we have already taken our first order for this solution."
In 2003 only 10 per cent of annuities policies written contained any health or lifestyle enhancement. Dunstan Thomas estimates that three times as many people that qualify for an enhanced annuity actually buy one. GE Life Annuities estimates that the capital value of the total future income lost by those buying an annuity (but not investigating enhanced annuity rates) in 2003 is a staggering Â£230 million.
Eyeedul Haque, business development manager at Pensions Annuity Friendly Society (PAFS) Limited explains how the market for annuities is changing:
"The market for bespoke annuities has become a great deal more sophisticated since we launched the first fully impaired annuities product 10 years ago. Today we offer enhanced annuities for those with conditions like Diabetes as well as unit-linked annuities. Others offer lifestyle annuities based on the amount people smoke and drink and how overweight they are. The market is fragmenting as well as growing and technology is important to help calculate a specific customerâs risk profile and automate illustrations."
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