Will you outlive your money? (A review of Abaris)

Abaris may help you save for retirement. Image: Freepik
Written by Rick Huckstep

Rick Huckstep casts a reviewer’s eye over US insurance tech startup Abaris.

Many workers approaching retirement age are faced with making complex, jargon-riddled decisions that will impact the quality of their remaining lifetime, for better or for worse! Their financial assets accumulated over a 40-year period must now be put to work. With the average age for those about to retire being in the mid to late eighties, and with 40% of them living into their nineties, workers need to plan for a lifespan of another 20 years or more after they retire from work.

An aging population and changing demographics around the world have put massive strains on corporate and government mechanisms to provide for those in retirement. The days of the defined benefit corporate pension are long gone, while state pensions and social welfare are under constant scrutiny to keep the pay bill down.

Over time, governments have introduced legislation to create new incentives for individuals to take greater personal responsibility for putting money aside for their retirement years. These are more than just tax breaks, as I mentioned a few weeks ago in an article about changes to UK pensions, and the tech startup Recordsure. The government reforms try to create an environment where individuals are incentivized (via tax breaks) and have some form of real choice (via flexibility in the highly regulated market).

Having featured the UK market recently, I was interested to speak this week to Matt Carey, CEO of insurance tech startup Abaris. Based in Philadelphia, Matt took me through its business in the US market for income annuities.

Three-legged approach to retirement financing

Matt (‘chief of retirement thinking’) is one of three co-founders of Abaris along with Nimish Shukla (‘chief of numbers and regulation’) and Adam Colombo (‘tech expert’). All three met through the Wharton School of the University of Pennsylvania in Philadelphia. Prior to forming the business, Matt worked on retirement policy for the US Treasury. It was here that he developed a profound understanding of the issue in the market from the decline in social security and pension performance.

In the US, like most societies, the system relies on a three-legged approach to retirement financing: pensions, savings, and social security. Whether an individual chooses to take an investment (take a risk) or an insurance (hedge your bets) approach at this point in their lives, the No 1 fear and risk for individuals remains the same: ‘Will I outlive my money?’.

While annuities in the US are not the norm, the high cost of distribution makes the income annuity market a good target for a new technology player such as Abaris
The annuity product provides certainty, but at a cost to the individual, partly driven by the capital and distribution cost for the insurance company, which can be as high as 20 cents on the dollar. And while annuities in the US are not the norm as they have been in the UK, the current high cost of distribution makes the income annuity market a good target for a new technology player such as Abaris. By creating more competition online and through taking smaller commissions, Abaris can pool longevity to create a simple and open marketplace.

Abaris is the only platform in the US market that can provide a real-time, like-for-like comparison of retail annuity products. The team’s current focus is on deferred income annuities, which are products that are purchased today with the promise of a certain future payout every month for the rest of one’s life. Individuals enter their basic information (date of birth, retirement age, income requirements) and Abaris, using its real-time API, will go out to seven of the 13 or so annuity providers that underwrite this product and compare the market. In a few seconds, the platform will present an apples-for-apples comparison of annuity options.

Simply, the platform will tell the individual, based on the data provided, and by normalizing the different responses from across the market, that provider A will, for example, pay out $700 a month, provider B will pay out $800 a month, and provider C will pay out $750 a month. Behind the scenes, the platform handles the jargon from each of the providers and makes sure that everything is translated to a common language. For example, different providers may use the same term, but with very different meanings. They may also use different terms for exactly the same meaning. They may also state some terms where other providers are silent. And who says we all speak a common language!

This inconsistency in the use of terms and the different uses of language are confusing for individuals, and previously made it hard for an informed buying decision to be made. It’s also made the challenge on the technology side complicated. Co-founder and tech expert Adam Colombo has taken lead on building a restful API that’s the first ever system that communicates programmatically with all of the carriers’ systems, thus enabling real-time quoting without providing access to the insurers’ underlying actuarial models. (For those interested in the tech stack, it’s built on Jersey, which runs on the JVM.)

Abaris also provides a simple comparison of the key differences between the product providers. To illustrate, one of the key variables that impacts the value of the annuity payout is the credit rating of the provider. Provider A may pay out

The real innovation comes from the flexibility the platform gives the individual to model different options
$700 a month and provider B may pay out $800 a month, but A has a higher credit rating than B, which means your $700 with A is, in theory, more secure than the $800 with B. The individual can make a choice of certainty over risk as they choose to do so. Yet, the real innovation comes from the flexibility that the platform gives the individual to model different options. What if the individual retired two years later, or at 70 instead of 65? What if they wanted to index link their income, or protect against a fixed rate of inflation?

The platform allows the individual to adjust key variables and, in real-time, compare the outcome from the annuity providers. At retirement age 65, provider B may have offered the best product, yet retire three years later, and now provider A has the best rate. Add in inflation protection at 2% per annum and now provider C has the best rate.

Intermediary commission

The user interface is beautifully simple, visually, and also in the way the site ‘talks’ to the user. Abaris has worked hard on its user experience, removing the traditional barrier of jargon when buying a complex product such as an annuity. The platform has also built in a trust promise to its users, which is that they won’t sell a product that isn’t right for the individual. Based on the individual’s details, the platform will inform the individual when the product they’re looking for isn’t for them, or if the variables they’ve entered don’t make good sense. It’s also transparent on the commission it earns as intermediary between the individual and the product provider.

In the US market, there are different regulations governing annuity products that vary state by state. This adds a layer of complexity in this market when comparing the different annuity providers, and the platform takes this into account when comparing prices across different products.

Abaris is a business that represents exactly what insurance tech is about. It has simplified a previously complicated buying issue for prospective retirees, and in doing so, it’s working to take the cost out of the supply chain and improve the consumer experience at the same time.

And if, like me, you were wondering where the name Abaris comes from – it’s from Greek mythology, where he was a priest to Apollo and was said to be ‘endowed with the gift of prophecy, and by this as well as his simplicity and honesty he created great sensation in Greece, and was held in high esteem’.

It seems to me to be an apt name for a business that combines simplicity, honesty and prophecy at the heart of its business.

– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read the original article here. Illustration: Shutterstock

About the author

Rick Huckstep

Rick is a sales expert with a passion for working with tech startups, digital disruption and the consumerization of technology. He has a background of 35 years' corporate experience in sales, management and operations, and over a decade of experience selling technology solutions into the insurance and banking sectors in the UK, Europe, US and Asia.

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