Category Life Insurance

Exploring the post-pandemic mortality experience

29 June 2023 Gareth Stokes

Life insurers and their reinsurance partners are hard at work to understand the post-pandemic claims landscape, and design the type of product that will give brokers and employee benefits consultants an edge over the coming three-to-five years. “The acute phase [of the pandemic] is thankfully over; but we would like to explore some of the longer-term implications and how insurers might choose to respond to some of the [emerging] post-pandemic trends,” said Peter Barrett, SVP, Global Head Underwriting, Claims and Medical at RGA.

USD100 billion in life claims paid, allegedly

Barrett was tasked with sharing post-COVID trends in the claims and underwriting disciplines during an RGA webinar titled ‘No pressure, no diamonds: unearthing opportunity in tough times’. His first observation was that pandemic had come at a significant cost to the life industry specifically, and society at large. To illustrate, he quoted the American Council for Life Insurers as reporting USD100 billion in life insurance claims paid in the United States during 2021 alone. PS, the cynical among you may question this number as being ‘too rounded’; but that was not the point of reporting it. 

The quantum of life claims paid over 2020, 2021 and 2022 reflect the value to consumers of having adequate life insurance cover in place while serving as a catalyst for providers across the insurance industry to rethink traditional ways of doing business. “The impact has been huge, not just in terms of the amount of money paid out, but across the many areas of insurance businesses in addition to underwriting and claims,” Barrett said. From an operational perspective, insurers and reinsurers in the health and life sectors have had to rethink every aspect of their businesses, from distribution to product design, and come up with ways to integrate emerging technologies in all aspects of their operations too. 

Supplemental methods of distribution…

The presentation rattled off a number of insurance-related, pandemic-induced changes. In the US, it contributed to an increased use of alternative data sources; in Asia, it led to the accelerated adoption of simplified policy issuance; and globally, to the pursuit of supplemental methods of distribution as well as maximising cross-selling and up-selling opportunities. 

Another post-pandemic development is a renewed focus among insurers and reinsurers on wellness. Stakeholders want to understand the impact of lifestyle on their policyholders’ wellbeing and figure out how to incorporate lifestyle changes into underwriting. This has been a feature of the local underwriting environment for decades thanks to the wellness programmes at diversified financial services providers like Discovery and Momentum. 

There has also been a notable shift in focus from the insurance industry, pre- and post-pandemic. During COVID-19 the focus was on paying claims and ensuring that underwriting philosophies were suitable in the pandemic context; now the focus has shifted to the longer-term impact of the virus on society. Barrett said that insurers and reinsurers were just starting to get to grips with the non-COVID excess mortality experience that is exhibiting in many country markets. He singled out missed diagnostic screenings; strain on healthcare systems; and loss of expected mortality improvements as likely contributors to this experience… 

There was some good news for the insured population, being that mortality levels are returning to pre-pandemic levels and that the relative mortality and morbidity risks for COVID survivors seems to reduce with time since infection. And finally, per the RGA presentation: “lifestyle factors are becoming increasingly important for long-term health”. 

Thorough claims record-keeping essential

Marilda Kotze, VP, Global Head of Claims at RGA, said that non-COVID excess mortality was of particular relevance to claims professionals. She pointed out that undiagnosed or unrecorded COVID deaths remained a challenge to the industry, and that the residual health impact of the virus was still largely unknown. “The impaired mortality risk for people who have had COVID is well documented … it is worse for those who were admitted to an ICU or treated in hospital with oxygen,” she said. “It is in our interest to better understand the insured population [and therefore we must] study the evidence and record insured’s COVID histories”. The ‘top tip’ for life insurers’ claims teams: record as much data as you can

There is no better way to learn than to put real world claims statistics under the microscope. RGA compared claims data from two UK-based insurers, Aviva and Legal & General, to illustrate that cancer had returned as the leading life insurance claim cause. Aviva’s 2022 statistics confirmed cancer as the leading cause for life insurance and terminal illness benefits for all age groups, except those under 30-years, where suicide featured. And Legal & General showed cancer as the top claim cause under its life product category for the same year. It is worth noting that cardiovascular claims featured prominently at both insurers too. “Cancer is back as the top claim cause across many age bands and products,” Kotze said. 

There is also early evidence of improved results in claims management. “Just over two thirds of people who make disability claims are returning to work with the help of rehab support provided by insurers,” Kotze said. “This statistic shows that when we are in a pressured environment ... and we support our claimants ... our insureds prove to be quite resilient and are able to return to work”. Going forward, insurers that provide rehabilitation support, especially for people with mental health conditions, will have a clear benefit in managing their claims experiences. This comment was made in the context of mental health being a top three disability claim cause for many insurers. 

Digitisation a major post-pandemic trend

RGA singled out ‘going digital’ as the top post-COVID global trend. “The first thing [to consider as you embark on your digitisation journey] is to have a clear strategy about what you want to achieve,” Barrett said. He pointed out that digital technology had to be adopted and / or aligned across business functions, with buy-in from executive teams, and with due consideration for cost. The busiest slide in the hour-long RGA presentation shared the range of digital underwriting possibilities across the six key functions: sourcing, input, processing, output, interaction and issuance. “We have gone from a relatively simple process to one where we now have a range of possibilities; some are future innovations while some are happening today,” Barrett said. 

He pointed out that tomorrow’s underwriting solutions will be built from a growing range of reinsurer innovations that can be combined and customised: “Ultimately all these differing capabilities, the technology, the data can be used to create a bespoke solution based on what is available and the processing capability that you have”. This concept was illustrated by how insurers were integrating OCR (Optical Character Recognition), NLP (Neuro-Linguistic Programming) and the RGA FAC Optimisation tool in their underwriting solutions. We borrowed from the RGA website for a description of the FAC tool, which “relies on Amazon Textract, a machine learning service from Amazon Web Services that uses OCR to extract text, handwriting, and data from scanned documents”. 

The vanguard of digital development

According to Barrett, the US remains at the vanguard of digital development. His four closing points included that picking risk selection and technology partners was challenging; that fair usage of data was paramount as insurers and reinsurers expanded beyond traditional data sets; that regulation was changing at breakneck speed to keep up with new tech adoption; and that success in claims and underwriting depended on integrating these various factors into a seamless, end-to-end solution. The claim discipline seems less impacted by new technology; yet there were many claim-related processes that were ‘ripe’ for automation. 

Kotze encouraged claims professionals to give careful thought to the activities, steps and tasks that could be automated or digitised. “There is no end-to-end magic solution that is going to give you all the efficiencies or gains that you imagine are possible; you need to start small, with a process or a function that is close to your team, [then] use a modular approach to achieve success, and scale from there,” Kotze concluded. 

Writer’s thoughts:

The high-level discussion of insurer and reinsurer claims and underwriting experiences post-pandemic may be lost on smaller FSPs. But there is some value in exploring the digitisation trend. Has the pandemic resulted in your advice practice or FSP adopting new digital technologies to perform old business processes, or have you undertaken process redesign in concert with tech adoption? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts


Added by Cynical Simon, 29 Jun 2023
This makes a lot of sense. It confronts each one of us ,even the small ones, with a crucial challenge namely: Where...What ...and How do I change [adept] ?
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