Several lifetime annuity providers were impacted by a reinsurer IT outage in the second half of last month, including Aviva, L&G, Scottish Widows and Standard Life.
As a result, more than half of the lifetime annuity open market was unable to provide underwritten annuity quotations for around a week. Some annuity providers were unable to quote at all during this period.
The exact reason behind the outage remains unconfirmed, although there are some whispers suggesting reasons behind the outage.
Annuity providers in the UK only have the option of three reinsurers to select from or they can do the role themselves, so there is not what I would call a vibrant reinsurer market in terms of the options available, and I imagine having such a limited number of reinsurers available has an impact on the competitiveness in this particular space.
Annuity providers use reinsurers during the quoting process, in particular, for underwritten quotes when health and lifestyle information has been disclosed – hence why the outage, in the main, impacted underwritten/enhanced annuity quotes.
The reinsurer calculates the potential annuitant’s life expectancy, providing a foundation for the annuity rate/yearly income figure to be returned.
I am conscious that I have introduced what the Information Commissioner’s Office would classify as sensitive data (a person’s health/medical information) into the process and although the reason for the outage has not been confirmed, I am reliably informed, that no data was lost.
In the majority of cases (if not all cases, as it should be), the information passed through the reinsurer's systems is anonymised.
As with any incident such as this, there will be further questions to be asked, investigations to be had and lessons to be learnt.
I can imagine many contracts and service-level agreements being checked and discussions ongoing with legal teams. A week feels like a long time for any outage; one has to question backup procedures and business continuity policies.
Some annuity providers (whether impacted by this outage or not) may well look to see what can be done should this situation happen again.
IT outages can be stressful and frustrating at the best of times – flashbacks of a time when I was involved in restoring corrupted email databases at 1am many years ago are currently sending shivers down my spine.
However, in this case, the outage not only presented itself as a bit of a test of everyone’s patience levels, but it was also a test for the annuity market as a whole and consumer duty.
It is no secret that the annuity market is going through somewhat of a resurgence of late. Looking at Google Trends data, interest in annuities was 80 per cent higher this October compared to October 2021.
