L&G shows we can all innovate if we try!

FCA sandbox


I have been reviewing the performance of various pension providers responding to  over 500 letters of authority issued by the 300 testers as AgeWage progresses through the FCA’s regulatory sandbox. The performance is mixed.

This blog looks at how some pension providers are rejecting innovation and how one has built a powerful business – by embracing smart contracts and the block chain. The lesson is clear – we can innovate if we try.

Abuse of our right to use e-signatures

ipo 2

A large number of pension administration teams still consider digital signatures as insecure and demand we print out digitally signed authorizations. Some go so far as refusing to accept or pass any data using email meaning that information requested under the GDPR arrives by post and has to be scanned back to digital format.

The most egregious example of these  breaches  of data rights is from an insurer whose email footer reads;

We’ve made a number of changes to make it easier to do business with us online, including submitting paperless instructions, removing the need for client signatures and managing your investments safely and securely online. 
We have a series of emails with this footer which begin
Unfortunately, we are currently unable to process your request as the provided Letter of Authority (LOA) has been electronically signed.

Providers who still take this approach might want to read the 124 page document from the Law Society or read this abridged summary entitled

“Electronic signatures legally valid, Law Commission confirms”


The impact of refusing to acknowledge this determination is that customers do not get to see the rates of return they have enjoyed from their savings in real time and can’t apply this data to get bench marked performance to compare  their pots.

Abuse of our right to be delivered portable data

Let’s remind us what the GDPR says about our rights to portable data.

  • The right to data portability allows individuals to obtain and reuse their personal data for their own purposes across different services.
  • It allows them to move, copy or transfer personal data easily from one IT environment to another in a safe and secure way, without affecting its usability.
  • Doing this enables individuals to take advantage of applications and services that can use this data to find them a better deal or help them understand their spending habits.

These rights are not recognized by many of the administrators we deal with.  They re-interpret them for their own convenience.  One of our major insurers has decided to limit the data they will provide their policyholders to the last two years, arbitrarily creating an internal rate of return that starts in 2018 whenever the policy was taken out.

I could go on. The point is that insurers cannot fight innovation by hiding behind security issues. It is up to them to make sure they comply with the rules without breaching data protocols.

But insurers do not have to behave like this

When there is a commercial case to adopt technology, insurers can and do. This is an extract from an article in Forbes magazine from Maarten Ectors, Legal & General’s Chief Innovation Officer


One challenge faced by the reinsurance market is the high degree of complexity inherent in these contracts. What’s more, setting them up can be a labor-intensive exercise. Parties and counterparties must verify and agree to complicated business rules. Contrast this with consumer insurance policies that can be set up in a few clicks.

At Legal & General (L&G), we use blockchain to break through these challenges to make complex reinsurance more efficient, affordable, and effective.

We are .. a provider of reinsurance for the pension risk transfer business. In pension risk transfer, an insurance company provides a guarantee to pay the annuities for members of a pension fund for the rest of their lives.

L&G has demonstrated an in-depth understanding of mortality trends and longevity risk, and proficiency in payroll, administration, and communication services. As part of our passion for moving the industry forward, we are pursuing innovative approaches to setting up contracts using blockchain.

Even though property and casualty insurance has been an early adopter of blockchain, we believe it is equally suited to the life and annuities sector and particularly the pension risk transfer business.

We considered several existing systems, but none could deliver the combination of security, flexibility, and auditability of the blockchain. We are convinced that blockchain is uniquely suited to the long-term nature of annuities, as it allows data and transactions to be signed, recorded, and maintained permanently and securely over the lifetime of these contracts, which can span more than 50 years.

It enables parties to exchange and agree upon data, to digitally and cryptographically sign the data, and to ensure that the data is perfectly traceable over any period of time—all without the need for a centralized authority. All members maintain a copy of the ledger database, providing greater transparency and independence.

Numerous benefits flow from this approach. First, blockchain provides a single version of the truth that remains immutable for the entire lifetime of the contract. At any point in the future, we can “turn back the clock” to any point in the lifetime of the contract, whether 5 years or 50 years in the past. We will be able to clearly understand what happened: who made which changes and when, who agreed to them, and the effects they had on the agreement. Given that pension contracts can last for decades, this is an essential feature.

Second, blockchain enables the use of smart contracts, which embody the business logic of a contract in code. This enables rapid execution of agreements and reconciliation of transactions, which are not possible when tracking contracts in Excel spreadsheets or using a ledger database technology with SQL-like interfaces. With a smart contract, we can automate complex transaction logic, enabling one-click execution. In our solution, we use smart contracts to manage pricing, claims, financial reporting, and collateral, providing an end-to-end ecosystem to streamline the reinsurance marketplace.

Our solution, known as Estuare, replaces multiple processes and systems traditionally used to support each function of reinsurance. The participants are L&G, direct insurers, and other reinsurers we partner with. We are exploring extending the system to more partners and insurers. Estuare has proven to cut monthly reconciliation from weeks to minutes. We expect it to lower costs, increase agility, and reduce risk for the pension risk transfer market. For the thousands of individuals whose pensions depend on risk management, this is exceptionally good news.

Feedback from clients that have piloted the system has been positive, especially about the simplicity and clarity of the underlying smart contract and the auditability it creates over any period. We are tremendously excited about the potential of blockchain to transform the life and annuities marketplace—and working closely with AWS to realize it.

Innovation where it suits

I totally agree with the approach adopted by L&G through Estruare. I suggested to its head of workplace pensions when some years ago she was exploring a new record-keeping system.

“Adopt smart contracts and move forwards” – said I

Right now, L&G are struggling to meet data requests from their workplace pension clients – corporate, trusts and individual. If only workplace pensions could have access to the technology that has revolutionized reinsurance!

The selective adoption of new technology seems to select against the customers who need innovation most – the DC savers. I do not single L&G out in this, indeed they have been a force for good through auto-enrolment.

But we have an immediate and pressing requirement for the sharing of pension data. We are in the midst of a consultation on data standards for the pension dashboards.

Whether it be through the adoption of the smart contracts – which are at the heart of the blockchain or by simply accepting the value of e-signatures and portable data at this difficult time, it is time we saw innovation for pension savers.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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