Metropolitan reduces risk premiums as AIDS mortality improves and benefits are restructured

Metropolitan Life announced that it has dropped quoted premiums on its Future Choice Cover Options suite of new generation risk products by about 30% on average and in excess of 45% on whole-of-life business. This comes after a risk assessment on HIV and AIDS revealed a better outlook on mortality which was reinforced by underwriting quality improvements and a restructure in policy benefits in response to customer demand.

This is the group's third re-rate in as many years. Metropolitan Odyssey, which focuses on the upper income market, reduced its risk premiums on its Life-plan product twice in as many years as claims experience revealed that mortality rates around the country was improving in the upper income groups.  
 
Paul Turner, Product Actuary at Metropolitan Retail says the latest re-rate confirms this trend. He says while life expectancy in SA had deteriorated over recent decades for the country as a whole through HIV and AIDS, estimated life expectancy in middle income groups has more recently been improving as more and more South Africans emerge from poverty and get better access to healthcare and as mortality forecasting tools improve.

In addition, says Turner, tele-underwriting (introduced in a new business process enhancement initiative two years ago), has markedly improved the cost-benefit of underwriting.   Metropolitans enhanced process was the life assurance industry's first end-to-end telephonic underwriting system. It enables customers to more easily provide information needed for underwriting using the telephone. It has resulted more accurate client information for a given cost, paving the way for better risk assessment and keener risk pricing.

Turner believes that as the middle-income market develops it becomes more discerning and insurers will have to worker harder to understand and respond to clients needs. Being able to canvass valid feedback from your market is therefore a key competency companies need to strengthen. In the case of Future Choice Cover Options a major cause of price reductions is as a result of listening to feedback from clients and distribution partners.  
 
"Given we were breaking new ground with a new generation product aimed at the middle-income market, rather than at the upper end, we could not simply follow the crowd and deliver a carbon-copy product to market. We believe the 'simple, high quality, no surprises' part of our value proposition is key to turning middle-income client's heads".

In it's original form Future Choice Cover Options had a number of built in features focussed on providing superior quality cover and supporting the maintenance of cover over the long term. One of these was a built in loyalty bonus structure that has now been removed. The Loyalty Bonus was essentially a reward for those policy members that kept policies in-force by allocating a 5% increase in cover every 30 months without increasing the premium at that stage.  Turner says that intermediary and client feedback revealed that the perceived value of the Loyalty Bonus did not weigh up against the price reduction possible when the bonus is removed. The removal of the bonus structure has contributed a significant proportion of the price reductions.