The Financial Services Authority wants to understand the level of the potential detriment for consumers if they do not shop around for annuities and wants to examine possible ways to improve the consumer experience, the regulator‘s insurance newsletter, to be published later today, will say.
The FSA began its thematic review on annuities in January 2013 and is likely to continue through to the second half of this year.
The project aims to explore the risk of detriment that consumers may face as a result of not shopping around when purchasing an annuity.
The first phase of this work will consider the level of detriment consumers suffer from not shopping around, and whether there are firms or particular groups of consumers where this detriment is more likely to occur.
This will involve a pricing survey of all annuity providers, and will compare the rates available to consumers through a range of distribution channels, including rates available through the open market option and those only available to existing pension policyholders.
The second phase will depend on the outcome of the first phase, and will consider whether firms’ processes for providing annuities facilitate or inhibit shopping around. The timing of this work will take account of the implementation of the ABI’s Code of Conduct on 1 March 2013.
Nick Poyntz-Wright, head of life insurance at the FSA, said: “The FCA has set out its vision to make sure markets work well so consumers get a fair deal. An annuity purchase is an important one off decision that has long term consequences for individuals if they get it wrong.
“We want to understand the level of the potential detriment for consumers if they do not shop around to see if there are ways to make this market work better for consumers.”
