COVID-19 and the insurance industry outlook - no, it isn't over...

In April almost everyone I know became an amateur epidemiologist, or at least, COVID-watcher. Today, many of my non-insurance colleagues are blessed with an almost-normal life. We have been fortunate - meaning it is vital to acknowledge that good policy and a little good luck, brought us here. The industry, however, has to take a slightly longer view. So what does COVID-19 mean for us now? 

On a cases per million bases I chose the following visualisation to help show where New Zealand is positioned, and just how fortunate we are. The US and Brazilian data shows how a badly managed response looks. No detailed critique here, you can find plenty elsewhere. 

The World detail in this chart is deeply suspect data. Some countries are so poor they have inadequate resources, some are so badly managed the data is deeply flawed, some are merely bad at testing. Germany shows how a poor start can quickly be converted into a good outcome - on a cases per million basis it is now doing better than Australia which is battling a resurgence in the disease. 

Removing the US, Brazil, and World, allows us to zoom in on the better performers: 

Australia's resurgence is instructive. It proves several things - given that the Victoria outbreak came from badly managed isolation, it was right that media were highly critical of security breaches. Given that it has happened it is right that government has been slow to create travel bubbles. Australia shows how fragile our position is until there is better news on the vaccine front. The longer we can contain the virus the better our chances get. I am still using the much maligned contact tracing app and signing in where I see the forms - even though most people aren't. Why? if someone breaches isolation and there is an outbreak that data is our best chance of avoiding a nationwide lockdown, again, which is proving so damaging to Victoria.

Removing Australia allows us to zoom in again on the best performers (setting aside China). To further reveal differences, I have switched to a log scale: 

 

Japan is battling a resurgence too, not at the level Australia is, but still ten times as many cases as we are managing (all in isolation). South Korea sits in between, just a little worse than us, but with those cases also being in well managed isolation, like ours. Taiwan has half the cases that we do on a per million basis. Vietnam, functionally none - both would be great places to travel agreement with!

For the insurance industry, whole of pandemic modelling remains a concern. A worst-case scenario would commence with a resurgence along the lines seen in Victoria, which breaks out into general community transmission. Choices we make today, could help. During lock down I cursed myself for not preparing better - but how many of us are wearing masks, even if just when we have a cold? Very few, and those are Kiwis with links to China, Taiwan, Japan, or South Korea. How many of us are contact tracing still? Few, yet that data could have helped Victoria avoid a second lock-down.

It is complacency which would undo all the good work of the team of five million, some of whom are hurting a lot from that sacrifice.

There is good news from the UK, US, and China, about potential vaccines. But the disease is still out there waiting for us. If we are to avoid thousands of deaths then we must remain vigilant. That is not a job solely for the government - it includes us. 

Even if we continue to track along the 'best case' scenario - cases only in managed isolation, and reasonably quick economic recovery, we can expect a fair measure of misery for those worst affected: lost jobs, lost homes, and disrupted lives. Those tend to have claims effects - IP claims last longer, trauma claims are deferred, some turn into life claims. 


Southern Cross study reveal unexpected implications of COVID-19, and more daily news

Southern Cross commissioned a study to understand the overall wellbeing of New Zealanders. The health of over 3,000 New Zealanders was examined in the study. The research was conducted during Level 4 and 3 so the implications of COVID-19 on the health of New Zealanders were examined.

“The Southern Cross Healthy Futures Report, conducted in partnership with Colmar Brunton, sought to track the physical, emotional and social health of more than 3,000 New Zealanders. Research began in 2019, but the survey period encompassed the Alert Level 4 and 3 lockdowns, giving insight on how these events affected the nation’s psyche.”

Some of the results of the study have be revealed and have indicated that COVID-19 had a positive impact on the health of participants. When compared to pre-lockdown, the sleep hours of more participants increased, feelings of loneliness decreased, the sense of belonging and connectedness increased, and physical activity increased.

“The research’s preliminary findings, ahead of its full release this month, indicated that the slower pace of life resulted in more people feeling that they were getting enough sleep – from 46% prior to lockdown to 61% during the lockdown. The average hours of sleep increased from 6.97 hours to 7.29 hours, meaning more New Zealanders were able to meet the recommended range of seven to nine hours of sleep.

Despite being isolated physically from friends and family during lockdown, the study found that feelings of loneliness decreased by 8%, as did concerns of being a burden on others – from 41% to 34%. According to the study, Kiwis also experienced a greater sense of belonging and connectedness to their community, up from 44% to 49%.

Physical activity also increased, with 60% of respondents considering themselves physically active, up from 52% before the lockdown.” Click here to read more

That was surprising to me, because it wasn't my experience, but on reflection, and after discussion with others, I can see how that would have been the case for many people. My own experience was a lot more work, less exercise, and less sleep. I get a lot of incidental exercise from going to appointments - so endless zoom meetings knocked a lot of that out. Also, I was one of the people where work got busier, not quieter, as lots of new data needed to be collected, people to be interviewed, policy changes had to be made at insurers, and new planning concepts had to be developed. Having said all that, the experience for others was more likely to be more common - and I shared some of that too - the idea of a shared challenge (COVID-19) and the need to respond. 

In other news:

Partners Life: Naomi on Premium Increases

AIA: 2020 Top Insurance Workplaces revealed


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. 


Lack of market maturity insulates insurers in the COVID-19 crisis

The the market for insurance has grown significantly in recent years. Chatswood defines the market as people with both the money, need, and health sufficient to buy insurance coverage. A rough proxy for this is the number of people in work between the ages of 16 and 65. Analysing the 2018 to 2019 year we found that when allowing for people entering and leaving the market the number of eligible people had grown by over 50,000 (up 1.4%) and GDP per capita had grown by 1.3%. This reflects the situation applicable for most of the last five years – a net increase in eligible people of around 50,000 per year. Giving us a number of about 2.6m people employed in June last year. That will take a big hit this year, but we also estimate that there are about a million people who have no cover, and probably about another million (based on Massey University research and other industry sources) who have less cover than they need. That presents us with a big cushion: as the size of the unmet opportunity is large compared to the size of the expected unemployment and income hit to come in the year. In effect, underinsurance, an industry weakness, dilutes the effect of the economic impact on the sector, provided we are prepared to see it as an opportunity, not as a fixed and immovable problem. 


Daily news update: Cigna price changes introduced, and more stories

Cigna has made price changes to a number of products. The range of the changes are detailed in the table below. You can tell from the variety of changes that this is a complete repricing exercise - not merely an increase or decrease of a blanket percentage. Some prices will be much more competitive. Some segments are being increased. The only way to know for certain, is to do a comparison for each life. That's why a price comparison across the market is vital if you wish to offer help to clients seeking the most competitive products. Quotemonster still offers free price comparisons for financial advisers with an FSP number and an email account. 

YRT Life

11/05/2020

From -12% to +8%

Level Life

11/05/2020

From -24% to +1% Non-Smokers & Female Smokers, from -17% to +8% Male Smokers

Trauma

11/05/2020

From -13% to +10% Non-Smokers & -3% to +15% Smokers

Level Trauma

11/05/2020

From -16% to +10% Non-Smokers, -16% to +18% Smokers

Income Protection

11/05/2020

From -1% to -2%

Mortgage Protection

11/05/2020

From + 5% to +25% Female, from +7% to +20% Male. As per discussion, indexation was previously offered free for the first year.

In other news:

AIA: Mentemia, a mental wellbeing app, is now part of the AIA Vitality program.

AIA: Clients can get one month’s premium free when they apply for a new eligible AIA policy between 5 March 2020 and 31 May 2020 and have the policy issued by 31 July 2020.

Partners Life: The automatic COVID-19 Mental Health exclusion that was applied to disability and business risk benefits has been replaced with more targeted and specific underwriting processes.

Partners Life: Clients who had the automatic mental health exclusion applied will have it replaced with an emergent mental health exclusion.

Partners Life: Underwriting restrictions 2020


DAILY NEWS: Increased interest in digital insurance and more

Consumer behaviour is often fluid. Trends, word of mouth as well as personal experiences play a part in changing decision-making processes and purchasing habits. Similar to other purchasing behaviours, the way people are choosing to purchase insurance is changing. There is an upward trend of people relying on their own research and not seeking advice from financial advisers. Similarly, there is an increased interest in digital insurance providers.  

"Consumers of all ages are adopting a “millennial mindset,” according to Capgemini and Efma’s World Insurance Report 2020. This means that consumers are increasingly trusting their own research to source and purchase insurance products themselves. Customers of all ages are also increasingly turning to digital channels in the face of the COVID-19 pandemic, the report found.

 

“Digital adoption is no longer a function of age; for those with access to the web and social media, researching and directly procuring insurance online has become mainstream across all generations,” Capgemini said.

 

To remain relevant, insurers must shape their existing products to meet evolving customer needs and preferences, the report said."

Furthermore, it is reported that:

“The COVID-19 lockdown will further fuel this trend as consumers are forced to use digital channels for day-to-day transactions, irrespective of age or tech know-how,” Capgemini said. 

In other news:

Advisers haven't done enough to digitise their offering - expert

Air pollution dropped dramatically during lockdown

FSC webinar: Introducing the financial resilience index

FSC webinar: A global response to COVID-19

FSC: Spotlight on Insurance


Cigna unveil product enhancements and new quoting software

Cigna has unveiled their new quoting software that allows advisers to generate quotes in real-time. Additionally, Cigna is looking to improve Assurance Extra, Business Assurance, Business Extra, and Agribusiness Extra product suites.

“Cigna New Zealand has rolled out a new online quote tool for its insurance advisers - the first in a series of planned improvements to help advisers work more efficiently.

CEO Gail Costa says the tool will allow advisers to obtain quotes in real time, giving them access to Cigna’s most up to date plans and pricing. It will also allow them to access both personal and business products at the same time.”

Gail Costa provided further insight about the software by stating that:

“This is a new kind of technology used for quotes, and it is an intuitive tool that uses all of the latest user experience ideas,” she explained.

“It also plugs into the medical database, and this makes it much easier for advisers to get accurate quotes for their clients, and also identify any other benefits they may need.”  Click here to read more

In other news:

Australia: ASIC cracks whip on three financial advisers

Suncorp: Suncorp reveals results and pandemic hit

Back to the office on Thursday (if you want)

Advisers complain about narrow rebate time limit

FMA: Cyber-resilience in FMA-regulated financial services


Latest news including: AIA Vitality updates

AIA has been helping clients stay active during the lockdown. AIA has modified how customers can earn points.

"With AIA Vitality at home, members can:

  • Earn up to 50 Points per day with online workouts: led by AIA Vitality Ambassadors Ian Jones, Laura Henshaw, Chris & Bec Judd and Sarah Piotrowski
  • Enjoy a 30 day free trial, plus 10% subscription discount, with Les Mills On Demand: gaining access to 13 fitness programs and over 800 of the world's best workouts
  • Track their activity with a new device: with 25% off across the Fitbit online store, in addition to 25% off on selected Garmin devices
  • Refresh their workout wardrobe with 40% off New Balance footwear and apparel: with a unique, single-use code available on purchases until 30 May 2020"

In other news:

FSC: FSC Connect: A mission to healthier lives with NZ rugby legend, Ian Jones

AIA: Healthy Ad Break

nib Australia: Shareholder Announcements

OUT NOW: ASSET May issue

Newpark: NewPark_Demo_Overview

Now is not the time to shut up about suicide

Many covid deaths in care homes are unrecorded


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?