The evolution of underwriting

Underwriting has evolved over time, as providers we have developed an understanding on how health and lifestyle conditions affect longevity. 

This has helped to establish a much broader consideration for each person’s individual circumstances and apply a bespoke rate according to their criteria.

The following examples help explain how underwriting has evolved, and why including health and lifestyle information in retirement planning is now more important than ever.

1. Standard

This is what the annuity market looked like for many years, with income based on standard rates with no health details included. The main differentiating factor for longevity was gender.


2. Standard/Smoker

This all changed in the 1990’s, with the introduction of smoker rates. This was ground-breaking at the time, as smoking has a proven detrimental effect on the health of an individual, which is likely to reduce their life expectancy. It also introduced the concept of ‘qualifying’ for a better rate of income.


3. Standard/ Smoker/Impaired

The next development was to recognise as well as smoking, severe health impairments can reduced life expectancy. For the first time, retirees were asked to supply more detailed health information, but limited to conditions that ‘qualified’.

 Standard/ Smoker/Impaired

4. Standard/Enhanced

Underwriting continued to develop, and amalgamated smoker and impaired rates, and included more medical and lifestyle conditions.

This became known as ‘enhanced/impaired’ and allowed providers to offer a better range of income rates.


5. Standard(+)/Staged Enhanced

This is where underwriting became much more sophisticated and specific. It recognised regional variations in longevity, and postcodes were included in ‘standard’ rates, to provide differentiation if retirees didn’t qualify for an enhanced rate.

For people in poor enough health and ‘qualified’, their income rate was now defined by how severe their condition(s) were, and rates were stepped according to severity.

 Severity of conditions

6. Personalised

This is where we are today. Everyone has their own individual longevity curve, based on their specific circumstances. No two curves will be the same, everyone is different.

This means there is no longer a ‘qualification’ benchmark. Everyone ‘quailifies’.


Examples of ‘personalised underwriting’

As an example of personalised underwriting, the following five people all have their own specific criteria of marital status, height and weight and how much they drink each week.

On the face of it, none of them are ill, and yet, all of them will receive a personalised rate of income.


Bob Married 5ft 10in / 13st 10lb 7
Mary Single 5ft 4in / 11st 11lb 18
John Widowed 5ft 5in / 8st 11lb 23
Dave Separated 5ft 10in / 17st 11lb 27
Helen Divorced 5ft 8in / 8st 7lb 21


 Evolution of underwriting chart - Examples of ‘personalised underwriting’

Source: Just 08.06.18 Individual 65, £100,000 purchase price, ‘lifestyle’ details as shown. Postcode RH2 7RT Payable monthly in advance, 5 year guaranteed period, no escalation and no spouses benefit. Allows for 2% adviser charge.