What if life insurers could help all policyholders with cancer live at least two years longer than they would have otherwise? Just imagine what that sort of breakthrough would do to how people perceive life insurance, while delivering massive gains in profitability to the insurers.
“We think that is doable, today,” Greig Woodring, the longtime CEO of RGA, told me when we talked recently about the future of life insurance and, in particular, the phenomenal potential of genomics.
Woodring, who retired as CEO in 2016 after building RGA into a giant with approximately $3.5 trillion of life reinsurance in force and assets of $89 billion, was referring specifically to what’s he’s seen through Genetic Life, a services company he’s been involved with for years. It offers a product that will pay to sequence the genome of a member’s cancer to help inform precision treatment and “provide a cancer support specialist and concierge navigation services that help them get through the disease,” he says. “We’ll also get our members into clinical trials at a much higher rate than they would if left to their own devices and steer them to the best cancer centers.”
He says the goal is “to get to the point of helping insurance companies largely eliminate cancer among their policyholders as cause of death. And right now, for most of them it’s a leading cause of death; underwriters don’t screen out cancers as well as they do, for example, cardiovascular deaths. You’ll be able to tell your policyholder base that, look, we’ll help you increase your health lifespan, at least partially, as best we can. This is a good message for a life insurance company.”
But understanding cancers more precisely and attacking them more effectively is really just the start of what we covered in the interview (whose full text you can read here). The backdrop is that the cost of sequencing a genome is plummeting, so it is becoming ever easier and cheaper to understand the genetic code of, well, everything.
While it took 13 years and billions of dollars to sequence the first human genome, finished in 2003, sequencing now costs less than $1,000 and can be done in hours. A $100 price point is in sight, based on devices under development now, and attachments are already available that let you sequence a genome using an app on your smartphone.
Combine that sort of understanding of the genetic code with the developments in the delivery of mRNA into the body that allowed for the Pfizer and Moderna COVID vaccines, and you can perhaps see the way to vaccines for cancers and many other diseases.
Artificial intelligence is speeding the progress of medicine, and at an accelerating rate. AI is, for instance, letting scientists see how proteins fold, which determines how they interact with each other. Determining how a single protein folded had until recently been too complex a problem for computers to solve and had required a complex chemical process that relied on a special type of X-ray produced by a synchrotron the size of a football stadium. The process could take a year and cost $120,000. But, in a development I wrote about here, Google’s DeepMind research arm used AI to solve the problem in late 2020 and now, within hours, can determine a protein’s folded shape more accurately than that elaborate chemical process. With the omicron variant of COVID, scientists knew from the genome what the virus looked like well before anyone could put it under an electron microscope.
AI will also help scientists and doctors understand how to use CRISPR, the near-magical gene-editing tool, to treat diseases by manipulating an individual’s genome — without causing all sorts of unintended consequences.
If it seems that I’m getting worked up about the potential of genomics here, it’s because I am. I recently published a book with two colleagues that goes into detail on how genomics will deliver nearly unlimited possibilities by 2050, so I’ve been stewing in genomics for years as we worked on the book.
If you’re interested in learning more on the subject than I’ve been able to cram into this short space, you can read an excerpt from the book here. (The excerpt includes the introduction and a chapter on climate change; the genomics material starts on p. 35.) If you’re interested in our vision for how genomics can play out, in combination with technologies in the other six areas (computing, communication, information, energy, water and transportation) where we see nearly limitless bounty by 2050 at near-zero cost, check out the book website.
Add up all the progress, and Woodring says:
“Many researchers believe, and are intensively investing money and effort, in the pursuit to extend the maximum human lifespan beyond the 100-year or 115-year mark to maybe 120 to 150. But who wants to live to 150 unless they’re healthy? So, life insurers may be well-positioned to extend the ‘healthspan’ of their policyholders. Life insurers should be concerned about the health of their policyholders more actively.”
Following his induction into the Insurance Hall of Fame at the Global Insurance Symposium held by the International Insurance Society last year, I sat down — via Zoom, of course, in these pandemic days — with Greig Woodring for what I thought would be some reflections on the history of the life insurance industry. After all, Woodring was the longtime CEO who built RGA into a giant with approximately $3.5 trillion of life reinsurance in force and assets of $89 billion.
In fact, he led us into a fascinating discussion of the future of life insurance, based on some developments in genomics that could make life insurers partners in health and greatly reduce (and eventually even eliminate?) many cancers as a cause of death among their clients.
Here is a lightly edited transcript of our discussion:
You’re often eloquent about the sweeping changes in life insurance that you’ve witnessed in your distinguished career, but I’d like to zero in on the opportunity you’re pursuing now, to exploit the extraordinary progress in understanding the human genome. You—and I—think genomics will have a profound effect on life insurance, among many areas, and I’m hoping to explore the opportunities.
Our increasingly detailed understanding of genetics and how it affects our health will turn a lot of the life insurance selection process on its head. The change will accelerate when the cost of sequencing a person’s genome drops from $1,000—roughly where it is today—to $100, which will be so cheap that pretty much everybody can have a copy of their genetic information. And the drop in cost isn’t that far off.
Many have gotten some information from some of the consumer tests, the 23andMe-type tests, and there’s going to be a time in the near future where you get all the information about your genome from advanced genomic sequencing.
Life insurers can also use genetic information to improve the health of existing, in-force policyholders, for the benefit of all. The interests are perfectly aligned. Life insurers want their policyholders to live longer, just as they themselves do.
Many researchers believe, and are intensively investing money and effort, in the pursuit to extend the maximum human lifespan beyond the 100-year or 115-year mark to maybe 120 to 150. But who wants to live to 150 unless they’re healthy? So, life insurers may be well-positioned to extend the “healthspan” of their policyholders. Life insurers should be concerned about the health of their policyholders more actively.
Life insurers will have to get up a genomics learning curve. They haven’t really begun that yet. And I think the understanding and usage of genetic information will separate companies that are successful in this next wave from the ones that fall behind a bit.
I can imagine an adverse selection problem. I mean, if I’m the one who pays $200 to have my genome sequenced and interpreted, I’m going to know much more about my likely lifespan than an insurer can, without access to that information. Does that seem to be a big problem, or do you see ways around the adverse selection issue?
I think that is a serious problem. Insurers will have to deal with that whether they want to or not. When consumers know their genetic information and can decide whether to buy life insurance, and how much, based on that information, the underwriting process needs to adapt. In the near future, clinical grade genomic information will be inexpensive and widely available.
Tell us a bit about Genomic Life, a company that you’ve been involved with for several years now and that I think illustrates the kind of opportunity that genomics will create, whether for insurers or for others.
Genomic Life is a service company, not a life insurer. A product that we’re offering first and have been for a couple of years now with good success is a cancer product. If someone gets cancer, we’ll sequence the cancer to help inform precision treatment, and we will provide a cancer support specialist and concierge navigation services that help them get through the disease and its emotional body blows. We’ll get our members into clinical trials at a much higher rate than they would if left to their own devices and steer them to the best cancer centers.
It’s very difficult to navigate through the labyrinth of a disease like cancer in the environment that we have for healthcare delivery in the U.S. market. So, we help people get through that.
And, at least as I see it, that sequencing of the cancer’s genome is just the start. AI will kick in, in terms of the analysis of people’s genomes and what they say about, among other things, propensity for certain diseases, as well as in terms of possible treatments for diseases. A business owned by Google showed earlier this year that its AI could determine how proteins fold, more accurately than the chemical process that had been used up until now—and that cost hundreds of thousands of dollars and required more than a year just to determine the shape of a single protein. The final shape of a protein—and not just the string of amino acids that compose it—determines so much about how that protein acts. And once you can do this kind of analysis, about the shape, in a computer rather than in a lab, the pace of analysis kicks into an exponentially faster gear.
I agree. That was a really big deal, even if it was little-noticed outside of the world that follows those sorts of things. If you think about the rapidity of the development of COVID vaccines, the same mRNA technology that was used for that could be used to develop cancer vaccines.
That is extremely possible and a logical next step. There are people working on it right now. So, don’t be surprised if there’s a whole host of cancer vaccines coming in the next couple of decades.
Are all these developments in genomics a separate stream that branches off from what you’ve done in life insurance or do they then feed back into life insurance?
It all feeds back into life insurance. Think about a life insurance company with a million policies. Those million policies are going to get 50,000 cancer cases a year. Now imagine we can keep each of those 50,000 people alive for an extra two years. What is the value of that to the insurance company? And we think that is doable, today.
We’re just touching the surface of dealing with cancer today compared with when you have liquid biopsies [blood tests that can detect a broad array of cancers] and other genetic-based tests coming along that will lower the death rates.
We’d like to get to the point of helping insurance companies largely eliminate cancer among their policyholders as cause of death. And right now, for most of them it’s a leading cause of death; underwriters don’t screen out cancers as well as they do, for example, cardiovascular deaths.
You’ll be able to tell your policyholder base that, look, we’ll help you increase your health lifespan, at least partially, as best we can. This is a good message for a life insurance company.
Fascinating. That feels like a reasonable place to end things. But do you have any parting words?
As you said, artificial intelligence has a big role to play. As you begin to use artificial intelligence in combination with genetic information, I think we’ll find doors to rooms we didn’t know existed. So, I’m really excited about the future of life insurance, and in a different way than it’s been in the past. Not only protecting you and your family from the adverse effects of premature death but helping maintain you in the best position to live a healthy, long life.
If that’s what a life insurance company becomes, I think that everybody will be excited.
A 2020 report from LIMRA found 54% of all people in the U.S. were covered by some type of life insurance. A 2021 report from the same organization found a mere 14% of Americans were covered with a disability insurance policy, down from 16% in 2020.
But which product — life or disability insurance — is more likely to be needed by a policyholder?
Then consider that many Americans live paycheck to paycheck and are woefully unprepared for an injury or illness that prevents them from earning steady income for an extended period.
A recent study from Breeze found 47% of Americans couldn’t cover a $1,000 expense with just personal savings (57% of women and 38% of men). The study also found the plurality (29%) of employed respondents could only last one to four weeks on both savings and debt if they suddenly stopped earning an income.
Despite the huge need, disability insurance remains a very small slice of the insurance marketplace. Only about $430 million in disability insurance premium was written in 2020 compared with almost $200 billion in life insurance premiums in the same year.
For too long, disability insurance has been hurt by outdated technology and sales strategies, as well as a lack of clarity around the product.
Legacy insurance carriers have lacked a direct-to-consumer platform (D2C) to provide disability insurance to consumers. With the majority of disability insurance sales still coming through the traditional network of brokerage general agencies (BGAs), this product has been sold the exact same way for over two decades.
Insurance is going the way of quick, online quoting that uses data and predictive analytics to not only approve or deny applicants but also determine their policy details. But disability insurance is playing catch-up. Carriers have lacked the data science capabilities required to quickly, digitally and accurately match consumers to a disability insurance policy based on occupation, health and other personal factors.
That lack means certain occupations cannot get fairly valued disability insurance quotes in a streamlined manner and are possibly pushed away from purchasing.
Look at the increasing number of 1099 workers. They may want disability insurance because they do not receive the same protection as full-time employees and may change jobs frequently.
However, carriers have lacked the data analytics to accurately and quickly price out a disability insurance policy for 1099 employees because there are so many variables at play.
Selling disability insurance has long been complicated because there is widespread confusion about what the product is, the benefits it provides and how the underwriting process works. The potential to grow this market just through consumer education is massive. But agents and brokers have stayed away because of the complexities involved in underwriting.
At Breeze, we’re working to grow the disability insurance market through a direct-to-consumer platform that uses data analytics to accurately and quickly quote policies in an entirely digital manner across a wide variety of professions and backgrounds. The legacy carriers we work with can still sell disability insurance through the traditional agent and broker network but now have a D2C marketplace that can hit consumers in every corner of the country. Agents, brokers and BGAs can also use our platform.
The potential for disability insurance is massive — and the more that activity can move online, the more consumers can be reached.
This article was written by Ronnie Klein for the International Insurance Society, a sister organization of Insurance Thought Leadership, under the umbrella of The Institutes. To see more IIS articles by Ronnie and other IIS experts, visit internationalinsurance.org.
There is a saying in German: “Traue keiner Statistik, die du nicht selbst gefälst hast.” This translates as, “Do not believe any statistic that you have not forged yourself.”
Many credit this saying to Winston Churchill, but Nazi propagandists actually made up the quote and attributed it to Churchill as a way of impugning him as a liar. It appears that “fake news” is not a new phenomenon.
An example of misleading statistics is when determining whether to take a medical test for a rare but serious disease like spina bifida. This rare disease causes the spine of a baby to form improperly and can lead to serious mobility impairments and possible organ malfunctions. Many doctors will recommend that the patient undergo a blood test to detect this disease. The test has improved over time and is now 95% accurate.
This sounds like an easy choice. The test is 95% accurate and can detect a horrible disease. But let’s explore.
The probability of contracting the disease, according to the U.S. Centers for Disease Control and Prevention (CDC), is 1 out of 2,758. Therefore, out of 1 million pregnancies, there should be approximately 363 babies, or 0.03%, born with spina bifida.
Assuming that all 1 million women opt for the test and that no false negatives occur, there will be 363 actual positives and about 49,982 false positives ((1,000,000 – 363) x .05) for a total of 50,345 positive tests. Receiving a positive result now means that the baby has a 363 in 50,345 chance of having spina bifida — or 0.7%.
Does this sound like a test with 95% accuracy?
Further, once a woman receives a positive test for fetal spina bifida, she must undergo follow-up tests that are a bit more invasive to more accurately determine the status of the baby. However, those additional tests take time to schedule and to generate results.
How much stress is the woman under during this time? What effect could this have on the unborn child? None of this is usually discussed with the mother.
How can a test that is 95% accurate change the probability of contracting the disease from 0.04% (363 out of 1 million) to 0.7% (363 out of 50,345)? Should an expectant mother take a test for a disease that will affect 363 babies out of 1 million? Armed with the correct statistics, an expectant mother will be much better prepared to make an informed decision.
COVID-19 statistics can also be misleading. The most common misstatement is that the disease only kills the elderly. According to the most recent data from the CDC at the time of this writing, 80.5% of COVID-19 deaths have occurred in people ages 65 and over in the U.S. On the surface, this seems like a daunting fact.
Of the nearly 540,000 U.S. deaths attributed to COVID-19 as of this writing, almost 435,000 are from people age 65 and over. Breaking it down further, 58% of all COVID-19 deaths occur in people age 75 and over. It is no wonder that most of the attention has been given to the most vulnerable people in these age groups. Why worry about those under age 65 when only 20% of COVID deaths can be attributed to this cohort?
Examining mortality by age for all causes shows that the statistics for COVID deaths do not vary greatly from all-cause mortality. Said another way, COVID deaths by age are highly correlated to deaths by all causes (see Figure 1).
Figure 1: COVID-19 Mortality vs. All-Cause Mortality by Age Group
Limiting the analysis to age groups over 25, which basically eliminates infant mortality and teen auto accidents, shows an even stronger correlation (see Figure 2).
Figure 2: COVID-19 Mortality vs. All-Cause Mortality by Age Group (25+)
While the media is quick to broadcast that approximately 80% of COVID-19 deaths occur in people over age 65, it fails to state that, in a given year, almost 75% of all-cause mortality occurs in the same age group.
Exploring the data for those ages 25 and up shows that people ages 75 and over account for 59% of all COVID-19 deaths and 56% of all-cause mortality – not far off. This virus is not only a worry for older people, it affects younger adults in a similar proportion to other causes of death.
What this means is that the target life insurance-buying population (people ages 30-60) should be very interested in purchasing life insurance to protect against this and future pandemics. COVID-19 increases mortality for adults of all ages at similar percentages. However, this very important fact is not widely broadcast in the news. And the life insurance industry has remained relatively silent on this topic, as evidenced by the continued flat sales of life insurance during the pandemic.
In the largest life insurance market in the world, the U.S., premium sales in 2020 actually dropped while number of policies showed a slight increase. Considering that there are no infectious disease exclusions in the vast majority of life insurance policies and that the world is in the midst of the worst pandemic in the past 100 years, one would think that sales of life insurance would be skyrocketing.
Every life insurance sales person will be familiar with the term “share of wallet.” Potential customers only have so much disposable income, and only a portion of that can be allocated to life insurance. While the pandemic should certainly highlight the need for life insurance, the ensuing financial crisis brought on by travel restrictions, hotel closures, restaurant closures and other lockdowns make certain that a person’s share of wallet is more focused on food, housing, medical supplies and other essentials. Life insurance has been moved further down the list.
A survey performed by the U.S. Census Bureau revealed that more than 60% of low-income families experienced “income shocks” during the pandemic. This includes food insecurity and delinquencies on rent or mortgage payments. The percentage is even higher for families with children (see Figure 3).
When choosing between paying rent or purchasing life insurance, there is no question at all. However, as bad as things are for these families, it will become much worse if the breadwinner dies due to COVID-19.
Figure 3: Share of Families Experiencing an Income Shock by Household Income and Presence of Children
The U.S. Congress recently passed the American Rescue Plan, which provides aid to all citizens and disproportionately helps low-income families. A family of four earning less than $150,000 per year received $6,400 in cash and possibly other benefits, including extended unemployment, tax credits and lower health insurance premiums.
If a family of four is earning $50,000 per year, this is more than a 12% increase in pay — and the money has already arrived. Similar packages have been offered in most developed countries in the world that are experiencing the same adverse mortality and economic downturn as the U.S.
These low- and middle-income people are suffering from a huge protection gap. One estimate places the middle-market protection gap in the U.S. at $12 trillion (see Figure 4). This is exactly the market that the life insurance industry has been talking about addressing, but failing to reach, for decades.
Wouldn’t this be a great opportunity to approach these people, as they receive a relatively sizable lump sum of cash? A small term policy that costs less than one-per-thousand for most of these ages would help to protect those families most in need.
But the window for action by the insurance industry is short, as these funds have already been distributed. This money will not sit around waiting to be spent on life insurance.
Selling pure protection to the middle markets during a pandemic is a great opportunity for the customer and the insurer. It provides much-needed protection during a time when excess deaths due to COVID-19 in the U.S. are estimated at about 16% (see Figure 5). It benefits insurers as a way to reach a market that has thus far eluded the insurance industry. And, it will help inform the middle markets of the importance of life insurance and may win over many customers for life.
The life insurance industry has long lived by the motto, “Let sleeping dogs lie.” During a 1-in-100-year pandemic, would it be worthwhile to attempt to make a change and tout the industry’s many benefits – especially to middle-income families? For example, would this be a good time for life insurers to contact all of their existing policyholders to remind them that policies are valid for death due to COVID-19? In-house lawyers can put in all of the caveats such as, “assuming all premium payments are current, assuming the policy is not accident-only, etc.”
J.D. Power performed a life insurance survey in late 2020 and concluded that “…a combination of infrequent client communications and a pervasive perception of high cost and transaction complexity have suppressed consumer interest and customer satisfaction with life insurance providers.”
Following the results of the survey, Robert Lajdziak, a senior consultant for J.D. Power, said that policyowners’ satisfaction with their life insurance products declines the moment the sale is completed. Lajdziak showed his surprise that this trend would continue during a pandemic and implores the industry to “rachet up” its client contact, not just its communication with agents.
To some, telling customers that they are covered for death due to disease is not necessary — but is this really the case? Just one Google search with the tagline, “Does life insurance pay for COVID-19 death?” will show how many articles have been written on this subject.
Why do customers need to get this information from a third party? While there may be risks to offering it to in-force policyholders, the benefits of this positive communication could dramatically outweigh these risks.
The life insurance industry protects policyholders from the financial hardships of premature death or disability of a breadwinner. This is especially important during a pandemic. However, sales of life insurance have been flat in most mature insurance markets for decades.
If a pandemic that is responsible for about an eighth of all deaths of people ages 25-64 cannot generate interest among the general population to purchase insurance, at a time when lump-sum stimulus payments are being made to lower-income earners, it is difficult to imagine what will cause an increase in sales. But consumers will not run to purchase this insurance. The industry must think of a coordinated, thoughtful and compelling message.
Epsilon Marketing estimated that there are about 50 million middle-market households in the U.S. A survey performed for this report revealed that reaching the middle market was a top priority for 25 of the 35 life insurance companies that responded. This survey was performed in 2014, so these companies and others had approximately seven years to work out a plan to reach this market.
Now is the time to “pull out all stops” and market aggressively. Doing that will generate sales and create an entire class of new life insurance purchasers who will be able to tell positive stories in the future. Starting this process may be as simple as communicating with existing policyholders about the benefits of their policies. Word of mouth among friends may be the best sales channel to reach the underserved middle markets and to help close the protection gap.
Selling more life insurance during a pandemic can bring peace of mind to customers and help protect their families. Yet, with all of the talk about new technologies to market, underwrite and speed policies to customers, there has been virtually no perceptible increase in life insurance sales.
This can be easily evidenced by QualRisk’s assessment that, in 2020, all-cause mortality increased in the U.S. by 16%, but there was only a 3% increase for individual life insurance. Some in the industry may look at this as a favorable outcome. What it really shows is the vast protection gap that exists in the U.S. and in all mature insurance markets in the world. It is time to do something differently and reach underserved markets. Now is a perfect time to begin.
Things as certain as death and taxes can be firmly believed. Believable, too, is that life is volatile and the cost of living highly variable. Because of these things, protecting your estate from taxation is one of several reasons why life insurance exists. How you structure this protection, transferring ownership of your policy and ensuring the payment of premiums while excluding this asset from your estate, is critical. That you act is critical, as the Biden administration wants to change major portions of the estate tax.
To start, the Tax Cuts and Jobs Act (TCJA) of 2017 exempts estates valued at up to $11.7 million. Whether life insurance proceeds are part of the taxable estate depends on who owns the policy at the time of the insured’s death. If you want to preserve your legacy, the owner and beneficiary of the proceeds from your life insurance policy must be another person or legal entity.
Choose wisely, because the owner of the policy is the person who is responsible for maintaining the policy. Because you do not want the policy to lapse due to failure on the owner’s part, or if the owner is a minor who is not able to pay the premiums without the approval of a legal guardian or trustee, make sure procedures are in place — perform the necessary due diligence — to make ownership convenient and secure.
An irrevocable life insurance trust (ILIT) is another means to a similar end, regarding estates and specific tax thresholds. In this case, the policy is owned by a trust. The proceeds are not part of your estate, nor are you a trustee in charge of the trust. You do not retain any rights to run or revoke the trust. The advantage here is the assurance that what must be done will be done, that premiums will be paid without delay, that the trust will honor its legal responsibilities.
An estate planning adviser can also determine if you can transfer money — funds relating to gifts — to the trust, thus reducing whatever taxes your estate may owe.
If the beneficiary is a child or an adult with special needs, an ILIT lets you name the trustee — a person you trust — to whom you entrust the handling of money on behalf of your child or children, according to the terms of the trust document.
In a word, documentation is key to any estate plan.
Documentation is verification of trust, affording you the peace of mind you deserve. Regardless of who owns the policy, whether the owner is an individual or an institution such as a legal trust, proof is in the paperwork; legal documentation is proof of ownership.
Do not tarry in attending to this work, lest the government be fastidious in its work of taxing the proceeds of your estate.
Trust, too, that the government will tax your estate unless you safeguard your estate.
For the good of your estate, with the opportunity for future generations to continue to do good, do what is right.