Stuff has this great article by Nile Bijoux about people being willing to lie to their insurer. Those are general insurers, but it seems a stretch to believe that the same people happy to lie on their car insurance application would suddenly become gravely honest when filling in a life application. Perhaps people don't really think of lying to their insurer as a big deal - so many do it. This is borne out in other markets too - in the UK it is estimated that it adds the equivalent of about $60 a year to every insurance policy. If that margin were applied to the 2.5 million life, trauma, IP, and TPD, policies in New Zealand it would mean about $150 million in fraud costs each year.
The BBC features this story pondering the impact of slower detection and delayed treatment on expected numbers of cancer deaths. The shorter period of restrictions on movement should make it possible for us to avoid quite the same experience - although it will take time for us to understand exactly what the impacts have been, and whether New Zealanders are back seeking tests, examinations, and treatment at the same levels that they were.
Lloyds of London has reported that COVID-19 will likely cost the global insurance industry over NZ$336 billion (US$200 billion). It is predicted that the industry will experience a greater loss if lockdowns around the world continue into the next quarter.
“The pandemic will cost the insurance industry over US$200 billion (NZ$336 billion), according to Lloyds of London, who estimated that its own payouts are now on a par with the Sept. 11, 2001 attacks or the combined impact of hurricanes Harvey, Maria and Irma in 2017.
Lloyds, which as an insurance market pays out to insurers affected by disasters, said it expects to pay between $3 billion and $4.3 billion to insurance companies to help them cope with the COVID-19 pandemic.
Losses could widen if lockdowns continue into the next quarter, which would push the overall cost to the insurance industry to $203 billion. Unlike the storms, for example, the pandemic's impact is global, systemic and long term.” Click here to read more
While most of those impacts are for catastrophe cover, there will be impacts on life insurers, especially in those markets where control measures were less successful.
In other news:
There is a concern among regulators that robo advisers do not make their selection process clear to customers - so algorithmic advice may be biased, especially in those cases where there is a choice of product providers. There are several ways such sites can lead clients to believe that their choice is perhaps wider and the process fairer than it might be. One is simply the way the starting set of companies is selected - if you have a mid-market product and you want to favour that one then it is easy to only select products that are in some obvious way 'worse' - say more expensive or offering less cover. The manner in which you apply selection criteria can affect outcomes too. If you apply selection criteria in a series of 'rounds' where you eliminate products you can imagine that if you knock out, say, all the products that are more expensive first, then in the second round you may find it easy to win on a coverage criteria. Even considering criteria in a balanced scorecard can be gamed in some ways - such as the weighting applied to each factor. That is why the Financial Conduct Authority in the UK is interested in how robo-advice works, and in particular how they meet requirements to check suitability, but also other advice safety issues.
It is not just bias in sales that concerns us - it also happens in underwriting and probably in claims. Humans are prone to bias in favour of groups to which they belong, and by implication against the others. That can reinforce existing societal prejudices and make life harder - more expensive policies and more declined claims - for minorities. Is there hope? This article from Daniel Schreiber, CEO & Co-founder at Lemonade explains how he thinks an AI we may never understand can eliminate discrimination and bias in insurance. Of course, I note that he isn't talking about bias in insurer selection - Lemonade is a single insurer offer, not a marketplace.
UK Doctors say in this article that over half of melanoma patients are now surviving the disease that was considered untreatable a decade ago. Immunotherapy drugs are making a big impact on survival rates and quality of life. A clinical trial was done and had side effects like fatigue, rashes and diarrhoea, and after the trial the decision to make these drugs available worldwide was one of the fastest in NHS history. It is paying dividends.
In the UK, where private insurers must meet most claims for accidents, the discount rate applied to settlements for lifetime loss of income has been a major problem for the last couple of years. The formula for the discount rate never envisaged the market conditions that followed the global financial crisis of 2008. The consequence of that was a negative discount rate: -0.75% applying to future income losses. This saw the capital cost for settlements balloon. So British Insurers are cheered by the review of the discount rate currently underway.
"We welcome today’s announcement. Insurers remain committed to paying 100% compensation and want to see a process for setting the Discount Rate that delivers a fair outcome for claimants, motorists and taxpayers. The outcome of the review must deliver this, and we will continue to play our part to ensure that it does." says James Dalton, Director, General Insurance Policy, Association of British Insurers of a recent announcement made to the London Stock Exchange. Click here to read more.
Obesity is a factor in cancer, this article explains how that works - and the changes necessary to reduce risks. My favourite part of the article is where they explains the action of a drug trial:
Prof Lydia Lynch said: "A compound that can block the fat uptake by natural killer cells might help.
"We tried it in the lab and found it allowed them to kill again.
"But arguably a better way would be to lose some weight - because that is healthier for you anyway."
You mean a better diet and more exercise? Dammit, I was hoping for a pill!
The Association of British Insurers has hosted a Dive In event in Edinburgh recently to highlight diversity and inclusion in the insurance industry. There are lots of good resources to be found at this website. Below is one, a few minutes with a partner of a major law firm talking about the importance of having a team that reflects the wide range of clients that they seek to serve.
Thanks for Jon-Paul Hale for bringing this article to our attention. In the UK there is an insurance scam being committed every minute. In 2017 a total of 562,000 insurance frauds were detected by insurers. Of these there were 113,000 fraudulent claims, and 449,000 dishonest insurance applications. The article describes some of the fraudsters claims and the punishments they received. Most of these are general insurance-related.
What's interesting about the article is that, either you can believe that people in the UK are peculiarly dishonest, or that their justice system is completely incapable of detecting when the insurer is having them on, or you begin to get the idea that some people feel that being dishonest with insurers is somehow 'okay', even, a kind of victimless crime. Of course, it has victims. The victims are insurers, and their shareholders - and you may not feel sorry for them - but mainly, they are other policy holders. It is worth noting, while looking at fraud statistics, that there are also case of just honest mistakes: people put the wrong thing down on the form, and insurers decline a claim that should be paid.
Mistakes happen everywhere. But if you read the article, you get a sense of the difference between fraud and mistakes.
You can even google insurance fraud videos. The one below is one of my favourites.
In another move that underlines AIG's intentions, both to grow and to compete in the digital future, they have bought a UK group insurer famed for automation. Link. More details on Ellipse at this link.