Product database updated

The QPR database has been updated and version 136 has been issued to subscribers and all changes are now live on Quotemonster. This version of the database includes the following changes:

Pinnacle Life policy wordings updated:

IP version 16/10/2018

Life version 01/12/2019

Funeral version 23/01/2019

Trauma version 01/12/2019

- no rating changes

 

Cigna business wording 11/05/2020 updated and rating changes applied. Revisions to ratings:

- IP/MP:

Future Insurability + Redundancy max entry/exit ages for Cigna

Pregnancy Premium Waiver Gender for Cigna

Insurable Income - SE rating for Partners Life

Insurable Income Salaried + SE amount score review

- Trauma:

> Diabetes Mellitus Adult definition, min age and amount score for Cigna

> Multiple Sclerosis definition review


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


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 issue underwriting guidance

Fidelity Life has issued underwriting guidance. This is valuable as underwriting on a case by case basis is required, providing guidance helps advisers and clients know what to expect: 

"New underwriting guidelines

Industries like travel, tourism, import/export, hospitality and retail will be particularly hard hit by Covid-19. On the other hand essential services like supermarkets and food producers, for example, will be largely unaffected.

The good news is at this time there’s still no need to put any broad, mandatory policy exclusions in place. And to be clear we’re still taking a case-by-case underwriting approach.

But, following discussions with our reinsurers, we’ve now introduced some new underwriting guidelines to ensure we’re consistent, particularly with disability cover and with individuals, occupations and industries impacted by Covid-19.

The guidelines include:
• postponing certain new business applications
• limiting maximum cover levels
• reintroducing an underwriting questionnaire
We’re not sure how long we’ll need to keep these guidelines in place but we’ll continuously review our position and let you know as soon as anything changes.

We want to help customers get disability cover

With the exception of Redundancy Cover all our products remain on sale.

With disability cover we’re committed to working with you to help customers get cover wherever possible. This means:
• We can still offer disability cover to many industries and individuals. We may also be able to underwrite agreed value benefits where there’s no change to duties, income or hours worked as a result of Covid-19
• We may be able to offer disability cover to individuals whose income could be impacted by Covid-19 by considering indemnity value benefits or limiting the benefit period. Wherever we can, we will look at options to provide cover
• We’re happy to include salaries and wages into income calculations, however in the present environment we can’t consider bonuses or commission payments"

 

Those income protection changes amount to a substantial change in policy. Given Treasury forecasts for the economy through to the end of 2021 I would not expect a return to pre-crisis IP underwriting in the near term, and perhaps, never. 

More details can be found at this link: https://advisers.fidelitylife.co.nz/media/q4nb13jv/fidelity-life-underwriting-guidelines-22-april-2020.pdf


Normal in the new not-normal

All underwriting involves balancing a range of factors, but income protection underwriting is at least an order of magnitude harder to get right compared to life cover. Mental health, financial underwriting, and moral hazard play a much greater part. So many insurers are adopting a wait and see approach to the product until it is possible to assess the full impact on the economy of the control measures deployed against COVID-19. But now is not a normal time - as this announcement from Asteron Life illustrates, and I think underlines the point not just for them, but also for other insurers: 

An update on underwriting

With many clients facing uncertainty around the future of their businesses and jobs, Asteron Life will continue to consider requests for Disability Income cover on their individual merits at time of application.

To remain consistent with our usual underwriting process, applicants who are currently working at full capacity in their usual hours and duties can still be considered for Disability Income cover. Applicants who are not currently working will have their Disability Income cover assessment deferred until they return to work in their usual capacity. If you’re unsure as to whether or not a client is eligible for Disability Income cover, please contact your aligned underwriter or BDM for guidance before submitting an application.

As one adviser put it to me recently, maybe you don't need to have a lot of new rules, maybe you just need to underwrite. The point here though is that very few people right now are working at full capacity in the usual hours and duties. Essential workers are, mostly. I am, and many knowledge workers in the financial sector will be, albeit from home. Just that change in location will affect the approach of some underwriters. But most of the workforce aren't. That cannot be ignored. If you aren't working in your normal hours, or your normal duties, and you aren't receiving your normal pay, and your business (or sector, or employer) doesn't have its normal future, you can't really expect to get normal IP terms. So underwriting in the time of COVID-19 is difficult and as I pointed out in my post below, income protection may never be the same again


Income protection: a potential casualty of COVID-19

There is a difficulty in rating income protection products at the moment - the market is changing fast, and not all the changes being implemented by the market are yet formal policy. Decision-making is emergent, cases are being reviewed as they arrive. Economic data which may have an effect on the views of underwriters contemplating, say, the financial underwriting aspects of cover on self-employed businesses (even if the case were submitted weeks ago) is not yet available. Just how substantial the impact on the economy has been is yet to be revealed. We are all, to some extent, guessing. 

Insurers are conservative in their views - they must be - and have to protect first and foremost the interests of existing customers, who expect them to meet claims. Income protection is not, for example, a form of redundancy insurance. What that means is that they are taking considerably more care with underwriting new cases than they would. Partners Life has made the most detailed announcements about their treatment of income protection policies and Quality Product Research Limited has adjusted ratings showing (for subscribers) on Quotemonster. However, this plainly fails to take into account the attitudes of underwriters to the cover across the market: Advisers tell me that variety of measures are being employed on a case-by-case basis: referring cover to reinsurers, reducing cover amounts, substituting indemnity contracts for other contract types, applying exclusions by endorsement, seeking additional financial information, deferring, and declining cases. The extent to which this all remains fluid over the next few weeks or coalesces into a new normal which becomes formalised in changes to income protection product ranges will very much depend on events: how soon we emerge from level four restrictions, more data about the impact on the local economy, and because we are a relatively open trading nation, the state of the economies of our main trading partners.

COVID-19 is most serious for people who already had underlying health impairments. Income protection is similar in that it already had serious problems before the COVID-19 pandemic, and the ensuing economic problems. It is in very bad shape now and we cannot say for sure how the product will fare over the next few weeks. It may never be the same again. 


IP ratings under review

Product scores for income protection products are under review. We need to consider how to take into account temporary measures being applied to contracts with some disablement components - IP, Trauma, and TPD - such as the recent restrictions being applied by Partners Life. In the meantime, you need to familiarise yourself with what those restrictions are and whether they apply to the cases you are submitting. We have a schedule of COVID-19 impacts available for subscribers in the quarterly life and health review, which will be issued today. 


Partners Life: Underwriting for COVID-19 financial risks

Partners Life are remaining open to new business during this uncertain time of COVID-19 but have announced a number of restrictions to IP, MP, and TPD, while placing a minimum 6 month stand-down for eligibility for Premium Holiday and Policy Suspension claims. Stating ‘As soon as we are able to remove these restrictions for new business, we will contact those advisers and clients affected directly to review and/or remove these restrictions for any policies issued during this interim period.’

Here is more information:

  1. No new Loss of Revenue Cover or Variable Loss of Revenue Cover benefits will be issued. The cover will be deferred.
     
  2. No new Agreed Value benefits based on Income will be issued. This includes Income Covers, Mortgage Repayment and Household Expenses benefit which are to be based on income. Indemnity Loss of Earnings Income Cover will be offered as an alternative by way of Offer of Terms.
     
  3. MRC and HEC based on actual mortgage repayments and expenses will still be allowed.
     
  4. Disability benefits of any kind will have a Mental health exclusion applied by way of Offer of Terms. This includes lump sum benefits which cover disability such as TPD, Trauma Cover and Hybrid Business Benefits.
     
  5. Disability benefits of any kind will have a restriction for disability first arising while a life assured is unemployed or is on a period of leave without pay. This includes lump sum benefits which cover disability such as TPD, Trauma Cover and Hybrid Business Benefits.

    These lives assured will instead be considered an Occupation Class 5 immediately they stop work rather than after the usual 12 month period. This restriction will be achieved by way of an Offer of Terms.
     
  6. All new policies to be issued will include a minimum 6 month stand-down for eligibility for Premium Holiday and Policy Suspension claims. This restriction which will be achieved by way of Offer of Terms.