U.K. Insurer to Use Postal Codes to Price Annuities

August 31, 2007 (PLANSPONSOR.com) - U.K. insurer Legal & General (L&G) has begun using individuals' postal codes to price its annuities, because it says where a person resides is a good indication of how long they are likely to live.

According to the BBC, L&G is using the postal code information, along with information about a customer’s gender, age and health, in a pilot project. The premise behind using postal codes is that the longer you are expected to live, the smaller your annual pension will be, for any particular sum of money used to buy the annuity.

Figures supplied by the L&G suggest that people who are identical in all other respects may get an extra 1% added to their income each year if they live in a postcode area where people’s average life expectancy is low.

However, a spokesperson for L&G said customers in the other areas would not see a reduction in their annuity offers.

L&G is drawing the data from the census and the Office for National Statistics data on houses, income and marital status, as well as its own customer data bank.