Medical underwriting to revolutionise later life market
Stephen Lowe is group communications director at Just Group
Official life expectancy figures published recently have made for grim reading, but the same statistics also revealed more people are reaching greater ages than ever before.
The number of centenarians rose by a fifth in just one year, in part due to the birth spike in the wake of World War One. More broadly, the UK population aged 90-plus has increased by more than 250% in the last 30 years and is set to carry on growing.
The figures add weight to questions about how best to prepare our finances for a retirement which could stretch across many decades.
We have an ageing population, many of whom will find their pension incomes unable to meet their later life aspirations, and in some cases needs.
It seems clear that releasing some of the trillions tied up in their homes is set to play an increasingly important role, whether it is used to provide extra income, to gift money, to spend on homes, cars or holidays, or to pay for professional care.
Anyone active in the later life lending market will already know how competitive it is, and innovative too, with new flexibility and features being introduced almost daily, enhancing advisers’ ability to tailor plans to each individual client’s needs.
And now we are at the start of a new era. Medical underwriting is set to revolutionise the lifetime mortgage market.
If you think that sounds a bit strong, then consider the huge impact of medical underwriting on the retirement income market a decade ago. By disclosing their health and lifestyle details, around six in 10 retirees were able to secure higher income from Guaranteed Income for Life solutions than if they had accepted the ‘standard’ rates they were offered.
Forward-thinking professional advisers were quick to see the benefits for their clients. Not only could they provide better outcomes for their clients but by treating each one as an individual it also allowed them to prove to the regulator that they were taking all possible steps to ensure they were meeting their ‘treating customers fairly’ obligations.
Launching medical underwriting across our Just For You lifetime mortgage range is already being seen across the industry as a game changer. It will make a difference to the many, not just the few.
Lenders will be under pressure from customers, advisers and the regulator to adapt or die. And advisers will start to use medical underwriting as a matter of course, ensuring they are offering each of their clients the best option for them.
Life expectancy is a key risk factor in pricing lifetime mortgages. Focusing on ‘medical age’ instead of ‘calendar age’ can expand client choice in terms of offering more competitive borrowing rates and/or higher borrowing limits. The difference in some cases can be counted in the tens of thousands of pounds of savings for the client over the term of the loan.
The average equity release borrower is almost 70, a time of life when health issues are more the norm than the exception. One in two people aged 65 or older has high blood pressure, 75% of 65 to 74-year-olds in England are overweight or obese – leading causes of type 2 diabetes, one in three cancer cases in the UK in 2015-17 were among people aged 75-plus, and one in eight aged 60-plus are smokers.
Advisers active in the guaranteed income for life and protection markets will already have experience of conversations around health and lifestyle and be used to using the digital technology that makes it efficient to generate instant medically underwritten quotes. This is not some rosy vision of the future, but a revolution advisers can lead from their desks today.
Research we carried out with more than 100 adviser firms earlier this year found 68% expected lifetime mortgage business to grow in the future.
Those who don’t grasp the opportunity offered by medical underwriting risk more than just becoming dinosaurs. They also face the wrath of the Financial Conduct Authority (FCA) that has made clear its expectation that advice must be personalised and not simply box-ticking exercises.
And those that do seize the chance are set to reap the considerable rewards of not just knowing they are better serving their clients but also being active in a market that is set for continued growth for decades to come.