Gastric cancer claim denial, and more daily news

After taking out life and trauma insurance from Westpac in 2013, a family was denied a $100,000 insurance payout after Ailepata Ailepata was diagnosed with gastric cancer. His wife Shirley Farani has said this money would have helped raise her children.

“A South Auckland crane driver has been denied a $100,000 payout for his gastric cancer after a government-owned finance company switched his policy.

His wife is furious that on the basis of what she says is a salesperson's garbled pitch - and despite recent official warnings to the insurance industry about its practice of "churning", or replacing old policies with new ones - her family of three children has now been pushed to financial breaking point.”

The switch in policy resulted after they inquired about taking out a mortgage and a New Zealand Home Loans broker suggested they change insurers.

“The family, who live in Māngere Bridge in Auckland, had paid for life and trauma insurance cover from Westpac since 2013. When, in 2018, they enquired about a mortgage with government-owned New Zealand Home Loans, an agent visited their home. He suggested changing insurers. They did, but ended up with less cover.”

The change in insurer meant that their new cover was $100,000, half the amount they had with Westpac.

“They thought having their insurance with their mortgage provider might make sense, she admitted. The new policy provided just $100,000 trauma cover, half of the $200,000 they had under Westpac.She found that out when she made a claim for the gastric cancer, she told RNZ.” Click here to read more

I am always conscious that there will be another side to this story, and knowing New Zealand Home Loans, a statement of advice on file. It will be important to know about those. Of course, either way, this won't look good. It is a reminder that doing the right thing isn't just a question of what is correct from a procedural point of view, but how it will look from the public perspective. Nobody wants coverage like this.

In other news:

Asteron Life: Market insights and impact from Covid-19 webinar

Fidelity life: Updated agency agreement will come into effect 6 July

FMA: Financial advice's 'golden opportunity'

FMA: John Botica welcomes disclosure requirements and new regime start dates


Making a living will

Insurance is, of course, about planning for a future event before it happens. For life insurance, it is often described as a fundamentally altruistic purchase: you buy it to benefit someone else. Of course, the holder does enjoy a benefit, which is peace of mind. The planning helps us to relax a bit about the future, a future we know is coming for us: one day our life will end. Making a living will is also a kind of plan. A way to say some of the more difficult things, or put in focus some of the things you would most like to be remembered for. At this link you will find a beautiful article about a living will and what it meant to the family. https://www.huffpost.com/entry/ethical-will-legacy-letter-why-you-want-one_n_5eeb7a09c5b6c8594c7f2d03 About a ten minute read and well worth it. 


Cancer diagnosis concerns

About a five minute read, this article covering concerns about catching up on delayed cancer diagnosis caused by the lock-down is well worth the read. I expect that we will not know the full impact (or which of the views in the article is more correct) for some time - possibly years. It is worth considering that the options were grim - without a strong response to COVID-19 then many people with cancer, who are immune compromised, would have died from COVID-19. The choice made may well have been the best possible choice, which still doesn't make it any easier for people concerned about the impact on their cancer prognosis of a delayed diagnosis. 


Daily news update: AIA and Southern Cross share claims insights, and more stories.

AIA and Southern Cross have provided insight into their claim volumes during Alert Level 4 and 3. Len Elikhis, chief officer, product and vitality highlighted that there was a drop in claim volumes, although he expects claims to have been deferred and not avoided. 

“AIA chief officer, product and vitality Len Elikhis says that for AIA, the vast majority of claims come from surgical procedures. Although the lockdown period saw a drop-off in claim volumes, he says these are more likely to be deferred rather than avoided, making any significant claims savings unlikely.

With Alert Level 2 offering more room for non-urgent procedures, Elikhis says insurers will start to see those claims numbers coming back up, and customers who put their claims off for the lockdown period will be looking to access elective procedures.”

Similarly, Southern Cross experienced a drop in claims during Level 4, however they paid out over 120,000 claims for consultations urgent care.

“Kerry Boille, chief sales officer at Southern Cross Health Society says that Southern Cross has also seen a reduction in claims since the lockdown, but has nonetheless paid a significant amount in consultations and urgent care. She says the focus has been on communicating clearly and openly with members, and in switching to digital consultations where possible.

“We are continuing to process and pay claims, and while we did see a drop-off, we’ve paid over 120,000 claims since we went into Alert Level 4 and the start of lockdown,” Boille said.Click here to read more

nib tell us that Mercy Ascot is now running providing surgeries on Saturdays to try and clear some of the backlog of treatment required. With responses like that the predictions that the sector will not catch up (and some treatments will simply not be provided) are likely to be proven wrong. 

In other news:

Partners Life: My Underwriting Manager (MUM) now automatically prompts updated COVID-19 related mental health questionnaires.

Partners Life: Underwriting restrictions 2020

nib: Webinar on how to use nibAPPLY to be held 10 June 2020

Fidelity Life: Insurer to move 270 Newmarket staff to CBD: Fidelity Life leases new Fanshawe St block

Coronavirus: Saturday surgeries to clear Northland DHB’s 900-strong backlog

Elective surgery back on and Taranaki GPs as busy as ever in level 2


COVID-19 Crisis will have diverse impacts on health and insurers

Members of parliament listened to the stories New Zealanders shared about their struggles and hardship during an Epidemic Response Committee meeting recently. No accounting of costs and benefits can be done in full for some years. The purpose of this post is not to attempt that. I acknowledge that a trade-off was made between the numbers that would become sick and die directly from COVID-19, indirectly from a poorly-managed response to the epidemic, against those that may suffer a similar fate because of restrictions due to the control measures. On balance, I prefer the control measures taken - as severely negative effects (more sickness and more death) are associated with a range of alternatives. However, the purpose of this post is rather to explore the impact on customers of insurance companies, and therefore the likely claim impact on insurers.

 

Death claims are much higher in markets where there has been a delayed or poorly managed response to the epidemic. Take the example of Lombardy, detailed in this news. Deaths from out of hospital cardiac arrests rose sharply, as people deferred or tried to avoid treatment, and possibly, some were simply unable to receive emergency treatment in time. Cancer treatment would likely have been affected similarly - as it has been in the UK, with some patients missing chemotherapy appointments, probably, in part, due to fear of visiting hospitals where there are a lot of COVID-19 patients. These all have an impact on insurers - as shown in these reported results from Europe: pandemic takes its toll on insurers’ first quarter results.

 

But that doesn't mean we have avoided all the negative effects of the pandemic. Various tests and treatment were deferred to ensure sufficient capacity in hospitals for the epidemic and they will take time to restart, let alone catch up. See: some DHBs weeks away from restarting breast cancer screening. Take cancer care: delays in diagnosis and treatment, for example, are likely to have some effects. In this news piece one patient explains the treatment delay and how they are now seeking treatment privately so that they will not have to wait. Inevitably in a large pool of people where diagnosis and treatment are delayed there will be some increase in cancers at a later stage and some increase in deaths. The difference between the effect of death claims from COVID-19 and those that may arise due to treatment delays is probably in three dimensions, time, scale, and age of the person affected. A COVID-19 death would tend to happen quickly, soon after the time of infection, compared to the cancer death that will emerge over a period of up to two years. The age of the person affected is likely to be younger, but the scale of people affected should be much smaller than the numbers that could have been affected by an un-managed outbreak. 

 

Three scenarios can be constructed. One was the expected claims budget for 2020 before the pandemic. It is the budget baseline. Then there is the possible scenario without effective management. Then there is the likely current scenario compared to the baseline. It seems clear that the 'saving' due to lower death claims from COVID-19 is probably large. But it not clear that the small reduction in deaths and injury due to fewer road accidents and workplace deaths may not be sufficient to off-set the other indirect affects of the COVID-19 crisis. At present, as explored in this blog post, the death rate is running slightly above last year. I think I would still expect higher claims for 2020 for life, trauma, and IP products as per this post. 

 

In other news:

Pandemic will reset all markets, economist says

Pricing strategy – choices and their meanings

Australia: Financial planners have proven incapable of self-regulation, but can FASEA stop the client rorts?

 

 


Fidelity Life on track to resume normal activity

“Labtests, Med Lab and many other labs are now back up and running for insurance-related blood work. 

 

Some GPs who were unavailable during the level 4 lockdown are also now resuming limited services, including for insurance medicals. 

 

Please note there may be limited availability for insurance-related blood work and medical exams. We recommend your customers phone ahead to ensure their chosen lab is open and they’re able to make an appointment.”

As a result, Fidelity Life are able to begin getting back to normalcy. 

“Now that lab services have resumed, we can start requesting the blood tests needed to progress pending cases. Our Underwriting team will go back over your pending cases and request these tests, however you’re also welcome to get in touch so we can action these promptly.”  

 

In other news:

SiFA: CoFI needs complete rewrite

Southern Cross: Health insurer Southern Cross charts course for clearing surgery backlog

AMP: AMP reports severe coronavirus hit

Partners Life: Lessons Of Resilience And How Saying “No” Is Part Of The Journey

AIA: Dealer groups should strengthen: AIA

Advisers say client engagement is "significantly up"

RBNZ: Advisers back removal of LVR restrictions


COVID-19 Impacts on claims - which insurers win or lose?

COVID-19 and associated policy responses impact all types of insurance differently, as media reports have somewhat highlighted recently. 

Vehicle insurers are enjoying a drop in claims due to the low levels of driving, and therefore accidents. Sense partners has a dashboard showing an index for traffic congestion with rates running between 20% and 40% of pre-lockdown levels. As the Insurance Council points out, not all car insurance costs come from driving, consider these complete idiots, but nevertheless, vehicle related thefts should be down too. Guyon Espiner, using overseas experience, estimated the saving to be $100million. I doubt it, especially as the contry gets moving again. There is a saving. There is also a cost - as the economic impact begins to bite, there will be missed premiums and cancelled coverage. Deferred maintenance on vehicles will take its toll as the months and years roll by. New cars are safer too and our fleet will age as people defer vehicle purchases. Some changes could be permanent - converts to cycling and working from home may find driving reduces to the point that the household can do with one less car. A handy change if they have taken a hit to income. But economic impacts will take time to flow through and for now, vehicle insurers have a saving. 

Health insurers are enjoying a drop in claims too as all non-essential medical care was deferred. This is opening up again, but capacity constraints mean that we simply cannot get all the deferred treatment done in the next month - or even the next few months. That has enabled Southern Cross to give back $50 million to policyholders and nib to defer a premium increase to next year. However, for reasons, 

Life, trauma, and income protection insurers will experience an increase in claims. The policy response in New Zealand has limited COVID-19 deaths very successfully. In fact our 'best case' scenario published in the week we started level four restrictions estimated 1,785 deaths and a direct claims impact of $22.8m. That excluded deaths from other causes running above trend. It is now clear that although we could see the number of deaths remain low (assuming no breakout of infection again) we can expect to see the death rate run significantly above trend - albeit much more modestly than the examples I gave from overseas in this article. Why? Although accidental deaths will fall this is expected to be off-set by other factors:

The first is that (as we have previously reported) COVID-19 deaths will probably be underestimated in current statistics as shown by overseas experience, more evidence came from the UK overnight as they restated upwards their COVID-19 death count, plus deaths from other causes will rise as a consequence of the lock-down and deferral of non-essential medical care. In the UK they expect cancer deaths to rise by 20% for this reason.  Life cover is typically five times the amount of trauma cover sums insured - so some trauma claims of $50,000 or $100,000 and a recovered living person will instead become a life insurance claim of $200,000 or $500,000, with a grieving family. Cancer is not alone in benefiting from early detection and treatment. Again, from the UK, medical experts are worried that there aren't enough people attending emergency rooms. For example: 

"... the British Heart Foundation (BHF) said on Thursday that as many as 5,000 people a month who would normally have gone to hospital with symptoms of a possible heart attack are putting their lives at risk by staying at home." from this article.

Again, an earlier intervention, and a smaller insurance claim is being turned into one which is larger, and has a far-reaching economic effect: many people experience their first heart attack while relatively young with plenty of life ahead of them: including a life contributing both personally and economically to their households and communities. These excess deaths will be experienced quickly (unlike the cancer deaths which may take months to emerge). They undoubtedly form a significant part of the excess mortality being seen in other countries.

This leads us to the psychological effects of the pandemic and the economic impacts arising from it and from the policy responses to it. Some of these will be felt in life insurance claims. In the UK researchers see the conditions for a sharp rise in suicides. Our suicide rate is 80% higher than the UK's and our mental health services are an identified weakness in overall health provision. According to Treasury economic forecasts we are headed for a bad recession. It will affect people. Some will die and some will experience bad mental health impacts, claiming on income protection policies. These impacts will likely be distributed over the next four years, based on past recessions, but the impacts will be felt for decades: some families, and the lives of their children, will be blighted by years of lost income and trauma due to the effects of losing a loved on to either suicide, or a prolonged period with severe symptoms. The impact of that on their long-run health, wealth, and happiness will be enormous. For life insurers the claims impacts can run from a $200,000 death claim (using a typical sum insured) to an income protection claim in the region of $1m over ten years. That is contributing to substantial changes to the sale and issue of income protection contracts. 

In sum, the impacts are hard to model and quantify, but they are not zero, they are negative - increasing claims costs - and they are likely to be well within the resources of virtually all insurers to manage. Having said that, you won't have to rely on my gut feeling: the Reserve Bank, however, has already asked for insurers to provide details of stress tests. 

Further work available:

I shall be asking my data folk to follow up in seeking more information about this and I shall expand on the estimates in my forthcoming quarterly market data update. Subscribers to my quarterly life and health sector report are welcome to have a copy of our COVID-19 deaths modelling. Just email me. 

 


Asteron’s commitment to service

With Asteron Life team members working remotely it is business per usual. Clients looking to make claims will be offered the usual service and support. Asteron is working alongside providers to offer rehabilitation and assessment services via video conference. In regards to underwriting, Asteron will continue using their tele-interviewing service. If you are looking to book a time, you can do so through AsteronConnect. Although Asteron is closing applications for redundancy cover and restricting clients from increasing their existing benefits, they are supporting clients who have changing financial circumstances by offering:

Options under Lump Sum Covers

  • Premium Holiday
  • Premium freeze
  • A mixture of stepped and level premiums
  • Restructuring Trauma cover

Options under Disability Income Covers

  • Premium and cover suspension  

Partners Life and Cigna offer claims reassurance

As most people cancel their life and trauma insurance before retiring, the majority of life and trauma policyholders are younger and more likely to survive COVID-19. For this reason, life insurers are not expecting an increase in claims as a result of COVID-19. In this article both Partners Life and Cigna confirm that they have pandemic insurance in place, but also remind customers that they have relatively low levels of insurance on those that are most likely to be affected. Click here to read more :

"From a claims point of view, we don't believe it will come across in our claims experience on the types of products we sell," said Naomi Ballantyne, founder and managing director of Partners Life.

Most people cancelled their life and trauma insurance long before they retired, meaning most policyholders were younger, and had a very high likelihood of surviving a Covid-19 should they be infected.

I expect all New Zealand life and health insurers are in good shape to meet all claims.


FMA confirms list of essential financial services - and helps insurers out with a claims

The FMA has confirmed a list of essential financial services, worked out in conjunction with the council of financial regulators in a recent statement:

The Government has confirmed that financial services are essential services that will continue operating when New Zealand moves to level 4 in its COVID-19 response.

The Council of Financial Regulators (CoFR) has consulted with the Government to provide detail on those financial services that should be considered essential services. This includes all financial institutions and suppliers or providers to those entities that are essential to ensure continued operation of our financial system and access to this system for all New Zealanders.

The detailed list includes specific inclusion for suppliers where they support essential operations, including the importance of those involved in claims: 

Access to medical records through doctors’ surgeries
Psychologists, counsellors etc. (mental health claims)
Access to medical laboratories for medical tests
Private hospitals and associated staff/professionals
Access to external medical specialists.

This will be a great relief to insurers and their clients. While we all expect that health resources will go first to saving lives, while there is capacity to provide help with claims, it is important.  Some clients depend on claims payments these for their livelihood. Even for clients that are not on claim, confidence in insurers is an important component of confidence in the financial system.