Transcript Life Underwriting Challenges and Policy Holder behaviour

Konanani Maswoba
Munichre
The next 45 minutes
 The mobile revolution
 Death of an underwriter
 Behavior engineering
 Claims experience
The mobile revolution
 A quiet revolution is underway, with technology is re-
configuring the traditional insurance distribution
model.
 The internet and mobile devices are impacting
distribution, but the overall share of e-commerce sales
is still low.
 Nonetheless, new technology is fundamentally
changing how consumers and firms interact with
insurers.
The mobile revolution
 The direction is clear: new technology will eventually
enable customers to arrange most of their insurance
through remote digital channels.
 The newest direct sales channels – the internet and mobile
devices – currently command a small portion of the market
in terms of premiums. Agents and brokers, and other
intermediaries such as retailers, banks and affinity groups
continue to dominate sales. However, the statistics on ecommerce insurance mask the impact new technologies
have already had on the overall distribution process.
The mobile revolution
 As Sun Life Financial commented “While North
American and European life insurance markets are
mature, the potential for insurance in the developing
world is estimated at between 1.5 and 3 billion policies,
with life and health insurance being the products most
in demand. These markets not only skew younger, they
are also increasingly mobile equipped. In the
developing world, mobile subscriptions more than
doubled from 2011 to 2013, surpassing those in
developed countries in 2013.”
Innovators in mobile
microinsurance
 The “embedded” model, through partnerships between mobile
company Tigo and insurance intermediaries MicroEnsure and
Bima, has brought life insurance to more than 1 million
individuals in Ghana and Tanzania, 80% of who had never
previously had coverage.
 The programme has created brand loyalty for Tigo and reduced
customer churn. The “embedded” model allows easy (free)
adoption for customers, while the requirement to actively opt-in
ensures they learn about the product. For “freemium,” Tigo offers
to double the insurance coverage for a monthly fee of
approximately USD 0.52.
 Within the first three months of operation in 2012, Tigo saw tens
of thousands of customers upgrade from free insurance to paid
premium products.
Innovators in mobile
microinsurance
 Mobile microinsurance has spread to Asia and Latin America, where
microinsurers are currently providing mobile services ranging from
basic casualty to full life cover.
 For instance, Colombian prepaid airtime retailer Fullcarga, in
partnership with local insurer Colpatria, offers insurance plans and
services through their online portal, as well as through both smart and
basic mobile devices. Prices range from annual premium of (USD 4)
for basic life and disability coverage to (USD 10) for extensive coverage.
 The monthly premium – approximately USD 0.42 for the most basic
life and accident plan – is below the microinsurance industry average of
USD 1.22.53
 One exception is Vodacom in South Africa, which has held an
insurance license since 2012 but still partners with Liberty as the main
insurer.
Death of an underwriter
 In life insurance ... physical examinations are common
[and] the timeline for purchasing insurance is often
measured in weeks rather than seconds.
 While invasive underwriting evidence provides very
strong protective and sentinel value that allows
insurers to combat adverse selection, it may serve as an
impediment to efficiently reaching the underinsured
younger or middle-income markets.
Death of an underwriter
 New medical technologies, smart phone apps and
data-driven predictive modelling solutions offer
opportunities to bridge the information gap between
applicants and insures while drastically reducing the
length and invasiveness of the underwriting process.
The Death- Underwriting in the big
data age
 The massive data sets that are growing at an
unimaginable rate are both a by-product and driver of
the technology revolution. With inputs available from
mobile devices, sensory technologies, ‘The Internet of
Things,’ unstructured data from social media – as well
as traditional, proprietary customer data bases
The Death-Is the environment too
complex for underwriters?
 Product complexity and relevance of the underwriting
requirements
 Compliance, privacy and security issues – How to
approach foreign territories risk and the moral risk of
financing known terrorist/freedom fighters.
 The ever changing tax environment, a case in point,
the treatment of income protector benefits for tax
purpose in South Africa
• Shrinking Market for Underwritten Products
The Current Competitive
Environment for the Life Insurance
Industry
•
Underwriting—A Competitive Advantage?
 In the absence of value and innovation, consumers will
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base their insurance purchase decisions solely on price.
value-creating mechanisms, underwriting is expensive
Borrowing from our non life colleagues; Telematics is the
latest technology with immense potential for insurers to
offer consumers better value and, at the same time, contain
costs.
It enables accurate risk assessment as insurers can charge
appropriate premiums for the risk component that is
within a client’s control.
This is because telematics technology gives clients the
opportunity to understand individual driving behaviour
Societal and Demographic Change
 Earlier/More Effective Disease Intervention- An example from General
practitoners affiliated to Discover health.
>Treatment check provides a detailed chronological history of an
applicant’s prescription history.
>First, the reports can be quite cumbersome to read and interpret. A
proposed insured with even a modest medical history may have an Rx
history that is pages and pages long detailing lists of drugs with exotic
sounding names. There are over 180,000 NDC (National Drug Code)
codes in use for drugs today with many duplicate names and similar
names for drugs that are used for entirely different medical situations.
>Second, the tools that have been widely available to help underwriters
decipher this report have been too simplistic in their approach –
dividing drugs into good drug/bad drug lists. This approach
dramatically oversimplifies a world where doctors have the freedom to
use prescriptions for off-label uses, and where the same drug can be
used for widely different medical reasons.
Societal and Demographic Change
• Continued Mortality Improvement
>HIV mortality example
• Customer Expectations
 The instant nodule generation
. Increased Focus on Health Habits
>Vitality and similar initiatives
The Competitive/Changing
Marketplace
• Alternative Data Sources- why are we sticky?ASSISA/LOA
protocol.
 Wearable data collectors?Why not learn from the
motor insurance industry?
 The Human Genome Project.
• Expert Systems/Decision Support Tools. An example from
ALLFINEZ
• How adaptable are our rating manuals?
• The Ultimate Technology Objective: POS Policy Issue
Behavior engineering
 Can an insurer induce a favorable behavior pattern
from the insured population pool? How is Discovery
life succeeding?
 A powerful market disruptor that could change the
way insurance works.
Good health and good driving, the
discovery experience
 Developed the first integrated product that allows
pricing to add driving behaviour as a risk-rating factor
to the dynamic pricing model.
 The separation of short-term and long-term
behavioural elements through a restructure of PayBack
and Cash Conversion Benefits.
Good health and good driving, the
discovery experience
 This improves the value proposition for consumers as
paybacks at an earlier stage are made possible,
resulting in increased engagement levels in Vitality,
better lapse rates and improved morbidity and
mortality experience.
How much savings will good
driving generate for the insurer
 Behavioral data from Discovery Insure as reported by
Discovery Group.
 Discovery’s short-term insurance company – shows
that the majority of motor vehicle accidents are
preceded by poor driving behavior such as harsh
braking and cornering as well as driving over the speed
limit.
 In 2012, motor vehicle accidents accounted for one in
five deaths on the Discovery Life book, which
amounted to overR245 million in claims.
How much savings will good
driving generate for the insurer
 Vitalitydrive clients have one-third less fatal car
accidents compared to the national average.
 It also shows a direct correlation between driving
behaviour and the incidence of claiming.
 Clients with high levels of harsh acceleration, harsh
braking and speeding have much higher claim ratios
than clients with low levels.
Reward for healthy
choices
The vitality experience
The vitality
experience
Claims experience from a client without incentives
THANK