Time to Embrace Inclusive Insurance
By Zoe Woodroffe
Reinsurance News, February 2022
In mature markets such as the UK, we have seen market growth year on year in recent times. New business sales in 2021 recovered to pre-pandemic levels. However, we can do more to reach customers who don’t think life insurance is for them. Access to insurance is a key focus in the UK life insurance market and the industry is collaborating to improve access via groups such as the Access to Insurance Group.
The public perception is that insurers simply don’t offer cover, or that it is difficult to source affordable, tailored cover. New market entrants and the development of alternative distribution channels are ways the industry is trying to open up the market to those who haven’t engaged previously. However, the limited availability of life and protection cover for people living with certain serious health conditions is becoming a critical issue for insurers.
An Issue of Growing Importance
Access to insurance is an increasingly important issue because the number of people living with chronic medical conditions is on the rise. How we deal with these challenges as we emerge from the pandemic and its consequences is a crucial question for the life insurance industry globally.
Conditions such has high blood pressure and diabetes are growing more prevalent among the population. The total number of people living with diabetes in the UK is around 4.9 million; it’s estimated that by 2030 that number will be 5.5 million or nearly 8 percent of the population.[1]
Thanks to advances in screening and treatment, cancer diagnoses and survival rates have soared in recent decades around the world. By 2030 it is estimated that over 5 percent of the UK population will be living with a cancer diagnosis.[2]
It’s not only chronic physical conditions that are trending up: the number of people with mental health conditions is growing. In England, one in four people will experience a mental health problem of some kind each year.[3] The cost of mental illness to the UK economy has been estimated at 4.5 percent of GDP.[4]
The difficulty that people with physical and mental health problems face accessing life insurance is a challenge the insurance industry should rise to address. After all, many of these individuals are potential customers, still in employment and with protection needs.
It’s possible that we as an industry have underserved this sector, placing our focus on gaining process efficiencies through automation and rules-based underwriting. Whatever the reason, the public perception is that insurers don’t cover people with chronic conditions, or that it’s simply too difficult for them to source cover.
Ensuring that the industry is at the forefront of developments to address these issues is imperative. We are best placed to understand our ecosystem and respond rather than rely on regulatory intervention as we have seen in other related industries.
Building Inclusive Solutions
But cover is available, and many insurers and brokers have been working on solutions for many years. Specialist brokers such as Cura operate in the UK market to help people with medical conditions who struggle to obtain the insurance they need.
Cura’s MD, Alan Knowles, explains that high percentage loadings on life cover have helped Cura secure cover for people with chronic conditions. Provision of income protection has improved, for people with diabetes (types 1 and 2) and also for those with HIV.
Knowles said that Critical Illness cover is still hard to obtain in the UK for those with a serious complex condition diagnosis and that COVID-19 has slowed progress on access to insurance as insurers have become more cautious of emerging risks.
Knowles and I agree that the industry must work to maintain the momentum it has gained recently and stay on the front foot. The alternative is to wait for regulators to step in and mandate change. But isn’t it preferable to develop our own solutions that widen access to insurance, rather than have measures forced on us?
We have seen in other markets that conditions previously regarded as uninsurable, or insurable only in a very restricted form, now have wider access to cover. In South Africa, for example, life insurers have responded to lobby pressure over the difficulties encountered by people diagnosed as HIV+ in obtaining life insurance. Over the last two decades the insurance industry in South Africa has developed its offering to the HIV+ community by collecting data, modeling local insured mortality, and understanding the impact of treatment on mortality. Initially the offering was conservative and had high premiums given the uncertainty in life expectancy for those with the condition, but by partnering with a disease management company and building treatment compliance into the product, coverage increased and became more affordable. There are now a range of cover options for those with HIV, from compulsory Group Life products with no HIV underwriting to HIV specific products with tailored underwriting and possibly treatment adherence requirements. The next step is to increase the options in the living benefit space.
Collaboration is Key
Data is key in driving the development needed to widen access. As an industry we talk more and more about the value in our own data. Ensuring we have systems in place to easily analyze and interrogate our own data is key to monitoring the performance of new and old products alike. Capturing data in a structured way makes this much easier, however, as data analytics techniques develop, accessing unstructured data becomes more and more possible.
The perfect dataset for pricing or product development of an underserved market is unlikely to exist. However, we can look at the medical profession and the data they have available. There is always likely to be uncertainty when using information for purposes other than the original intention (for example studies may be short in duration and not cover a potential insurance portfolio), but with careful collaboration and the levers of product design we can be brave.
Using product design, we can reduce the risk in new products for new markets. For example, we can, if necessary, limit policy duration, sum assured, or the level of guarantee offered until experience is understood and assumptions verified.
In this way, we can develop specialist products just as South African insurers have for people with HIV+. In the UK, Gen Re already works with clients to offer tailored solutions for those with diabetes and those with severe mental illness. Both these solutions have bespoke application processes and offer cover where it is usually declined; in the case of severe mental illness, cover is provided with a permanent suicide exclusion.
We should be striving for products that are as close to the standard product as possible, without being shackled to that model. When we deviate from the standard, for example by introducing an alternative underwriting approach, requiring ongoing engagement, or limiting cover, we should be able to demonstrate the benefit to the consumer in one of the following areas: improved customer experience, better coverage, or more affordable premiums.
We should also be prepared to review application processes and underwriting question sets and recognize that a more sympathetic approach is needed if we are to gather the information needed to aid underwriting decisions, especially given the social stigma around certain medical conditions. Does the environment lend itself to customers feeling comfortable to disclose the information needed? Do advisors have the training to support customers in disclosing such confidential information?
Increasing access to insurance ought to be a big priority for all carriers today. It is the right thing to do from a societal point of view and it creates new opportunities for everyone. A new way of thinking is needed, but the challenges are not insurmountable.
Certainly, doing nothing is no longer an option.
Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the newsletter editors, or the respective authors’ employers.
Zoe Woodroffe, FIA, is head of Pricing and Research for Gen Re’s Life/Health business in the UK & Ireland. She can be contacted on zoe.woodroffe@genre.com.