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Skydiving Accident

A client had a skydiving accident yesterday. It's terrible to hear - multiple fractures, painful, but not, fortunately, life threatening - but it's also a very good reason to cancel a meeting. Furthermore, if you are going to break your ankle, skydiving is the way to go. Not getting out of the car at the supermarket. :-) We wish him well for a good recovery.


Mortality Risk Factors

I found this fascinating chart in a Ministry of Health report titled "The Health of New Zealand".

As a single cause, Tobacco causes the most deaths of all risk factors. But many, many, of the other factors are also essentially 'lifestyle' choices. The introduction to the report notes that Nutrition-related risks factors rank highly. Nutrition, you see, figures large in cholesterol levels, blood pressue risks, BMI (obviously), Type 2 Diabetes, and lack of fruit and veges. One might consider insufficient physical activity as a closely related factor to nutrition (the level required is lower if you eat less, and you are less likely to exercise properly if you are overweight). 

Then we get down to a genuinely 'external' factor - and a surprisingly large one too: "adverse in-hospital health care events" - that's not all deaths, that's only deaths from the care. I was astonished to see that I was about three times as likely to be killed in hospital than on the roads.

Air pollution is a bigger issue that alcohol and drugs - who knew? I'm getting greener by the minute reading this.Violence - murder and suicide - again, a bigger issue that road safety.

The lesson, I am sorry to tell you is that your future, folks, is largely in your own hands. You can start with a re-think of what's for lunch.

Mortality Burden Risk Factors 1996 to 1998

 


Peter Neilson's Speech at The Principles for Sustainable Insurance Conference

Can be found over here. Here is a handy list of the four principles for sustainable insurance:

  • PRINCIPLE 1: WE WILL SYSTEMATICALLY CONSIDER ENVIRONMENTAL, SOCIAL AND GOVERNANCE ISSUES IN OUR BUSINESS PRINCIPLES, STRATEGIES AND OPERATIONS.
  • PRINCIPLE 2: WE WILL ENGAGE WITH INSURANCE INDUSTRY PARTICIPANTS TO RAISE AWARENESS ON ENVIRONMENTAL, SOCIAL AND GOVERNANCE ISSUES, REDUCE RISK AND DEVELOP SOLUTIONS.
  • PRINCIPLE 3: WE WILL WORK TOGETHER WITH SOCIETY TO ENHANCE OUR EFFECTIVENESS IN IMPLEMENTING THE PRINCIPLES.
  • PRINCIPLE 4: WE WILL BE TRANSPARENT BY REPORTING ON OUR ACTIVITIES AND PROGRESS IN IMPLEMENTING THE PRINCIPLES.

Ratings Agencies In Trouble

The Risk Management Monitor carries a piece at present about a US Justice Department investigation into S&P's role in rating mortgaged-backed securities. Whatever the merits of the investigation, if I were an American taxpayer I would be glad to hear of it. Any crisis that costs so much deserves to have all participants examined for their role. But politicians should not forget to consider their own failings: they created some of the curious distortions to the market as well - such as the federal mortgage insurance entities - which encouraged many of the poor practices that led to failure.

Back home we might consider the value of ratings. A high rating was assigned to AMI. Just what did that rating tell us? How could a rating have distinguished meaningfully between AMI and other companies that had less risk concentration and better preparedness? I am open to the idea that the answers may not be possible, or may not be economic, but they should be considered - especially as mandatory ratings for insurers are supposed to be part of the overall legal and regulatory protections for consumers.


Older lives: It's about employment, pricing, and claims management

I am all in favour of a good dose of discrimination when it comes to risk pools. An insurable risk is something that comes as a surprise: so we are permitted to discriminate against people that are already unwell, or have a much greater likelihood of suffering from the insurable event than the others in the risk pool. That's not just about profit, it is about equity between participants in the risk pool. That is why we are permitted to charge different rates based on age, for example, provided they are based on reasonable information about claims experience.

However, sometimes tradition gets in the way of habit. One example is the age-based termination of plans - usually income protection, trauma, and total and permanent disablement. Priced correctly, and / or allied with definitions tied to pre-disability work, we can make these products function perfectly well for the increasing numbers of people in the workforce after age 65. Maximum claim periods can also be set without reference to age in many cases, or with a reducing reference to age.

Of course, many clients will choose to reduce or terminate their insurance cover as they get older. This may be a function of cost, but also, we hope, of reduced need as their assets rise and their financial commitments, such as debt or the need to support young children, diminish.

Given the increasing likelihood that clients now in their 30s and 40s will probably work until they are 70, I would expect financial advisers to consider continuation of cover past 65 as much more important - and insurance companies should drop the out-dated approach of age-based termination - or at the very least update their view of the natural termination of full-time work to age 70.