Transcript Document

Specialty Track: Individual
Session # D1-PD
General
Meeting
Montreal
Wednesday,
November 17,
2004
Underwriting Trends
in Canada
Moderator:
Panellists:
Mary Forrest, Munich Re
Nazir Damji, Sun Life
Dr. Robert Snihura, RBC Life
Brenda Buckingham, Swiss Re
Introduction …
Mary Forrest
Senior Vice President, Individual Life
Munich Reinsurance
Annual General Meeting – November 2004
From an Underwriter’s
Perspective …
Nazir Damji
Individual Underwriting Vice President
Sun Life Assurance Company of Canada
Annual General Meeting – November 2004
Placements
•
•
76% Placed Standard
20% Not Placed
20%
Placed
Not Placed
76%
*Source Munich Re Pricing Survey 2004
Annual General Meeting – November 2004
Cost of Wastage
$13,750,000
*Source Munich Re Pricing Survey 2004
Annual General Meeting – November 2004
Tele-Underwriting Data
Collection
•
•
•
•
More disclosure
More details
Less APS’s
Mixed feelings amongst advisors and clients
Annual General Meeting – November 2004
Non-Invasive Lab Tests
Oral
– Cotinine
– Cocaine
– HIV anti-bodies
Skin Sterol
Annual General Meeting – November 2004
Prudent Underwriting
Reward or Penalty?
Annual General Meeting – November 2004
From a Medical Director’s
Perspective …
Robert Snihura MD FRCPC
VP & Chief Medical Director
RBC Insurance
Annual General Meeting – November 2004
Any Changes Since 1848?
•
•
•
•
•
•
•
•
•
•
•
•
Prompt reply from MD—one day turn around!
NOTE: “he/his” and “she/her” option in some questions
Is he generally healthy?
Habits of & mode of life (regular & temperate)?
– Alcohol, tobacco, exercise, avocations
Past health history?
Immune to disease (of the day)?
Arthritis?
Seizures?
Brain, viscera (chest & abd. organs) healthy?
Any predisposition to genetic/inherited disease?
Family history?
How long will he live?…as long as any 36 y.o. male
Annual General Meeting – November 2004
Changes in Past 25 Years
•
•
HIV (1981)…revolutionized medical underwriting/lab tests
– Now have urine, blood, oral fluid, hair analysis and…
– Home HIV tests (potential for anti-selection)
Technology…faster, easier, safer diagnosis & Rx
– Ultrasound: echocardiography (incl. transesophageal or TEE),
breast, abdominal, pelvic, transrectal (prostate)
– Computerized Axial Tomography CT Scan (CAT Scan)
– Positron Emission Tomography (PET Scan)
– Single Photon Emission Computerized Tomography (SPECT
Scan)
– Magnetic Resonance Imaging (MRI)
Annual General Meeting – November 2004
Changes in Past 25 Years
•
•
Procedures:
– Fine Needle Aspiration Biopsy (FNAB)
– Laparoscopic surgery
– Endoscopic technology & treatment
– Catheter technology:
• Angiography
• Angioplasty
• Stent
• Radiofrequency ablation
– Laser treatment: corneal, skin, palatal
New Medications +++
Annual General Meeting – November 2004
cont’d.
Changes in Past 10 Years
•
•
•
•
•
•
•
Rapid expansion of medical knowledge & information almost
faster than underwriters and medical directors can
learn…information bombardment
Human Genome has been mapped…therefore, public access to
new (and poorly understood) genetic data
Pressure on researchers to produce new medications
quickly…therefore, what can we believe? …..….
Conflicting information now appearing, e.g., Vioxx, HRT, betacarotene; PSA vs uPM3; SSRI’s & bone loss, etc.
Faster, bigger, better tests…“Ultra Fast CT Scan”
“Self-serve Strip Mall Medicine”..can buy a CT Scan report
Huge expansion in imaging, catheter, stent, laparoscopic, fine
needle technology…surgery faster, safer, easier
Annual General Meeting – November 2004
Changes in Past 10 Years
•
•
•
•
•
•
cont’d.
New sophisticated treatments for cardiac disease, HBP, lipid
control, chronic hepatitis C, MS, transplants, cancer
Huge expansion in micro-technology (e.g., swallowed video
camera), imaging, catheter, laparoscopic, stent, fine needle
technology and treatments
Novel fertility, cloning technology
Surgery is faster, easier, safer…but bed shortages and long
waiting times now
Fewer doctors; busier doctors
More non-traditional medicine and self-care
Annual General Meeting – November 2004
Medical Underwriting in Next
10 Years
New Medications in Future:
•
Molecular technology allows for genetically engineered and
targeted medication (e.g., specific antiviral agents (Hep. B, C,
etc.)
•
For acquired disease (arteriosclerosis, cancer, DM, obesity,
hypertension, etc.)
•
For inherited disease (e.g., cystic fibrosis, muscular dystrophies,
polycystic kidneys, etc.)
Annual General Meeting – November 2004
Medical Underwriting in Next
10 Years
New Diagnostic and Therapeutic Technology in Future:
•
Improved tissue-specific imaging (adeno. vs squamous)
•
Micro-surgical technology (brain, eye, ears, vascular)
•
Minimally invasive cardiac repairs
•
Robotic/remote surgery
•
Endoscopic vascular repairs
•
Transplant (growth of organs in animal donors)
•
Genetically engineered cell growth (e.g., new heart cells after an
acute myocardial infarction, new neurologic tissue after a stroke
or spinal injury, etc.)
Annual General Meeting – November 2004
Medical Underwriting in Next
10 Years
New Laboratory Technology in Future:
•
More sensitive/specific tests to predict cancer, cardiovascular &
other risks (better mortality assessment)
•
More oral fluid, transcutaneous testing
•
Home testing for e.g., infections, CVS risk, etc. (nondisclosure
risk)
•
Detailed, specific/targeted genetic testing esp. for personal/home
use (non-disclosure risk)
•
More detailed prenatal screening
Annual General Meeting – November 2004
Medical Underwriting in Next
10 Years
Increased Information Availability in Future:
•
Unsupervised, uncensored, unedited Internet provides people
with both real knowledge and pseudo-knowledge about medicine
and insurance products…Internet is like an intellectual Flea
Market: mainly junk, lots of marginally useful things, and an
occasional item of value
•
Busier MD’s…less time for patients…more self-directed care by
patients (non-disclosure risk)
•
More non-traditional medical treatment, e.g., OTC naturopathic
meds (non-disclosure risk)
•
Direct to patient advertising of drugs
•
More OTC medication (GI meds, NSAID’s)
Annual General Meeting – November 2004
Medical Underwriting in Next
10 Years
New Problems in Future:
•
Exposure to unusual/resistant organisms:
– Travel abroad (TB, malaria, new viruses, animals, birds)
– Hospitals (MRSA, vancomycin-resistant enterococci, E-coli, C.
difficile, pneumococcus, STD’s, HIV)
•
Pandemics and new diseases (e.g., SARS, Avian flu, etc.)
•
New environmental problems & diseases, e.g., respiratory &
cardiac disease associated with pollution (traffic, industrial
waste; human waste, etc.)
•
Affordability of expensive new treatments and technology…
“haves & have nots”
•
Increasing cost of public health care system
•
Fewer MD’s and greater privacy concerns:
– Therefore, less medical information about clients…need other
means to assess risks
Annual General Meeting – November 2004
Doctor’s Typical Day
What is a doctor’s typical day to day activity?
•
•
•
•
History
Examination
Investigation
Prescribe treatment
Annual General Meeting – November 2004
The 21st Century Insurance
Applicant
•
•
•
•
•
•
Knows his/her own history and family history
Can read about his/her symptoms on Internet
Can get full exam from private clinic in Canada or USA
Can “buy” genetic testing
Has access to self-directed USA style strip mall imaging
Can get many meds OTC or from the USA
– The typical APS may not reveal any of the above information
Annual General Meeting – November 2004
What to do?
•
•
•
•
•
•
Look for other means of gathering medical risk - data from
patients/clients, e.g.:
– Health card data in Canada
Stricter requirements:
– More detailed blood/fluid analysis (= more cost)
– More focused lab analysis (e.g., CAD markers)
– Obtain info. from all practitioners; all Rx even OTC Rx
Novel ways to price group/population risks
Fewer preferred categories/cases
Continued close scrutiny of medical literature
Close watch for self-directed health care esp. genetic tests
Annual General Meeting – November 2004
From a Reinsurer’s
Perspective …
Brenda Buckingham
President and CEO
Swiss Re Life and Health, Canada
Annual General Meeting – November 2004
Canadian Underwriting Trends
– Are You Aware?
Expected mortality results can only be realized
when actuaries and underwriters work together to
achieve a full understanding of each others
expectations, and business environments
Annual General Meeting – November 2004
Underwriting Business
Environment
1. Competitive market
2. Underwriting guideline liberalizations
3. Capacity limitations, reduced auto/jumbo limits
Annual General Meeting – November 2004
Competitive Market
•
•
Canadian individual insurance market is very concentrated
The competition for new business is largely occurring on the
underwriting front
– Reduce cycle time
– Reduce expenses
– Emphasis on MGA/Broker relationships
Annual General Meeting – November 2004
Competitive Market
•
•
•
Increased number of business decisions (relationships)
Reduced compliance with age/amount requirements (cycle time,
expense, relationships)
Reduced adherence to preferred criteria (relationships, expense)
Annual General Meeting – November 2004
North American Underwriting
Audit Survey 2002
•
•
Importance of compliance with treaty guidelines (binding, plan,
pool share, etc.):
Extremely important
– Reinsurers
85%
– Direct writers
70%
Compliance with age/amount requirements:
Extremely important
– Reinsurers
62%
– Direct writers
49%
Annual General Meeting – November 2004
North American Underwriting
Audit Survey 2002
•
•
Adherence to preferred criteria:
Extremely important
– Reinsurers
77%
– Direct writers
44%
Business decision justification:
Extremely important
– Reinsurers
100%
– Direct writers
47%
Annual General Meeting – November 2004
North American Underwriting
Audit Survey 2002
•
Percentage of business decisions allowed:
– Reinsurers
– Direct writers
Less than 2%
92%
51%
Annual General Meeting – November 2004
Audits and Surveys
– What we found
•
•
•
•
•
Underwriters stretch cholesterol and build in the preferred
criteria
Overall underwriting error is minimal
Attending physician statements are waived more often than any
other requirement
The underwriting of combinations of impairments should be
strengthened
Benefits of financial underwriting are under appreciated
Annual General Meeting – November 2004
2002 Protective Value Study
Proportional mortality cost of eliminating a requirement
from underwriting model of study cohort
MVR
Part 3
MIB
Part 2
Application
Blood
APS
10 to 20%
>20%
Rx Profile
Urine
ECG
1 to 5%
6 to 10%
Part 2: Self-reported medical history
Part 3: Physical measures statistics
Source: Swiss Re
Note: Mortality costs were adjusted for issue age and frequency requirement was ordered.
Annual General Meeting – November 2004
Competitive Market –
Auto/Fac Study
•
•
Received 24,535 automatic submissions from 6 Canadian
Companies (covering 11 months)
Reviewed 2 groups of business from each of these 6 Companies
Group A –
cases ceded to Swiss Re automatically and seen
facultatively from another Company - Swiss Re
assessed higher or with added requirements
Group B –
cases submitted facultatively to Swiss Re and also
received automatically from another Company at
lower rating or with less evidence
Annual General Meeting – November 2004
Auto/Fac Study Results
Ratio of Findings to Total
%
1.8
1.6
1.4
1.2
1
by # of policies
by face amount
0.8
0.6
0.4
0.2
0
A
B
Annual General Meeting – November 2004
Auto Fac Study - What we
found
•
•
•
•
Generally, customer appreciation for completing the study and
taking action where required
Unacceptable levels of aggressive automatic underwriting
Evidence of market pressure. By amount results are considerably
worse than by number of policies
Higher level of exceptions/more aggressive underwriting
occurring on larger amount (high profile) cases
Annual General Meeting – November 2004
Competitive Market
Heightened level of competition in the primary market is impacting
reinsured block (automatic and facultative)
How much room do we have in our pricing?
Annual General Meeting – November 2004
Underwriting Guideline
Liberalizations
•
There is a trend towards liberalization of age/amount
underwriting guidelines
– Non-med, no fluids to $250,000 age 45
– Fewer medical exams, increased use of parameds and
abbreviated paramed exams
– Fewer inspection reports and financial statements
– Fewer treadmills and higher EKG limits
– Fewer APS’s, with increased use of teleunderwriting and
questionnaires
Annual General Meeting – November 2004
Testing Limits Are Increasing Why?
•
•
•
•
•
Reduce cycle time
Reduce expenses
Enhance customer experience
Pressure from the Distributors
Low risk - increasing share of related mortality risk has shifted to
reinsurer
Annual General Meeting – November 2004
Non-Meds, No Fluids
•
•
Of particular concern is the upward movement of limits for nonmeds and no fluids
This is a material sector of the market
Annual General Meeting – November 2004
Non-Meds, No Fluids
•
We are limiting our ability to select against risks that have the
greatest impact on our expected mortality
–
–
–
–
–
–
Smoking
Aids
Obesity
Hypertension
Diabetes or other kidney impairments
Liver function tests
Annual General Meeting – November 2004
Non-Meds, No Fluids
•
•
Do our pricing mortality expectations accurately reflect the
impact of these new underwriting guidelines?
Aggregate comparison scenario
Annual General Meeting – November 2004
Aggregate Comparison Scenario
blend of 3 sets of reinsurance rates - 1984
blended rate with 2.4% annual mortality improvement to 2004
X
CIA 86-92
Annual General Meeting – November 2004
Changes Impacting YRT Rates
•
•
•
•
•
•
Table shave programmes
Old business was typically XS, today QS
Introduction of Preferred – better risks go elsewhere
Lower interest rate environment
Capital requirements
Etc.
So, where does the YRT rate for fluid free <45 really lie?
Annual General Meeting – November 2004
Capacity, Reduced
Auto/Jumbo Limits
•
•
Capacity limited to $75 million in Canada
Auto/Jumbo limits coming down
– At older ages, for additional underwriting scrutiny
– Reporting delays cause retention issues for retrocessionares
and reinsurers – they can be bound by multiple sources on
the same risk
Annual General Meeting – November 2004
Be kind (but firm) with your underwriting brethren.
Times are tough.
Annual General Meeting – November 2004
Questions?
Annual General Meeting – November 2004