Tag Archives: life insurer

Is Apple the Next Big Life Insurer?

There is a monster lurking beneath the insurance companies. For now, it lies dormant, having already been satiated by enormous feasts of industry. But soon it will soon grow hungry again and may turn its voracious appetite and overwhelming power on the insurance industry. I am speaking, of course, about Apple.

The tech giant is one of the biggest potential competitors of insurers, having the capital, ingenuity and distribution to become a major player in the industry. And this monster moves frighteningly quickly. Within a matter of months, Apple could release a top-notch life insurance product coupled with an enticing marketing campaign, effecting disaster for major insurance companies.

Picture the following scenario: Apple execs, eyeing their unholy pool of liquid capital, begin brainstorming, “How to use it?” Stagnation must be prevented, growth is the mantra, the motive. “The phone and computer markets are nigh entirely tapped! Not much growth to be had there. We must look… elsewhere.” And then, an idea! Insurance! And the more they turn this idea over, the more practicable it appears, until they have a detailed plan, a proof of concept, laying out exactly the methods and means and growth timeline, and everything else required to break into insurance.

See also: This Is Not Your Father’s Life Insurance  

The plan, fitting very neatly within Apple’s modus operandi, is to galvanize some of their best and brightest into creating a sophisticated machine learning program for underwriting. Even the execs can see that machine learning software has potential for revolutionizing underwriting, it being a chancy, complex business. Not only would the software handle variables with an incredible efficiency, it would be able to identify new markers of mortality with relative ease. The program would also be able to draw from the huge amount of existing user data. Apple Health Kit alone could be a treasure trove of data plundered for mortality tables. And how much more does Apple have than that?! Location tracking, financial information… our whole lives are stored on our phones! One reels at the sheer amount of underwriting power this machine learning program would have.

While the underwriting software is being developed, the marketing team goes to work setting up all the pieces they will need to successfully move into insurance. They set their developers to work building the app on which the insurance products will be purveyed and managed, directly embedded in iOS, just like Health Kit and other apps. Then, the team produces a slick commercial, as Apple is known to do, introducing their newest product, “Apple Life.” Apple Life is “life insurance as it should be,” i.e. hassle-free, cheaper, personalized and guaranteed by more cash reserves than any insurance company has.

Now, there’s just one more step before going public: getting the paper, as they say in the industry, meaning making legally compliant products. While Apple would have no problem doing this itself, the quickest route would be to engage insurers and reinsurers that have already paved the way in all 50 states; they would be amenable to such a partnership, to say the least. Once the deal’s done, and the app is developed, and all teams are prepared to take this thing live, the execs pause, and they smile the kind of smile that comes when one knows he’s won for sure and that no one else does. Smugly satisfied, they release the app, queue the oh-so seductive marketing campaign, and voila! the public is smitten. Life insurance for all!

Yet, perhaps after pondering a little more, the execs may realize there is an even quicker, deadlier way to realize Apple Life. They propose, “Why spend months on end developing proprietary underwriting software, when we could simply assemble the most effective underwriting practices of existing MGUs and put our distribution power behind it, the one thing they have always lacked?”

And then, “Why not, instead of building our own life insurance app, engage an insurtech?”

Knowing Apple, they would probably buy one to keep everything in-house, only making sure that the insurtech acquired has a viable product for them to release.

The execs gloat, “Ah this plan is so much easier, so much quicker than the first. All we’re really doing now is draping our brand over products others develop for us. And, with our distribution power, not to mention our vast, unholy pool of liquid capital, these products will be a smashing success, without the time and hassle of us building them from scratch.”

See also: What’s Next for Life Insurance Industry?  

A clever plan, isn’t it? Apple would be able to execute this likely within the matter of a few months, which should put the fear of… something into life insurers. Maybe extinction. All Apple really needs to do is leverage its $260 billion in cash to hire the right people, then throw their brand and distribution power behind what those people provide. It’s that simple. And it’s clearly not just Apple that could do this— Amazon, Google, Microsoft, etc. are equally scary monsters looming far too near to the insurance industry.

So what can life insurers do to prevent against this kind of scenario? Simple. Tap the talent before Apple does. Contract or buy a good insurtech, so you, life insurer, can release the hip, new life insurance product first.

A Better Question for Evaluating Tech

Earlier this month, my colleague Monique Hesseling wrote about the power of asking the right questions in product development. That is just as important with new technologies.

As we have seen with social media and smartphones, what were once “emerging” technologies can become widely available and widely used in a very short time. Insurers have developed ways to use both of these technologies in new products and services, although plenty of untapped opportunity remains in both areas. But as new technologies continue to emerge, how do we, as an industry, continue to incorporate them into products and services?

The conversations about using new technology in insurance have typically centered on two questions: Why? and Why not? The Whys, as we shall call them, are reluctant to adopt new technologies because the status quo works (or works well enough). The Why Nots, on the other hand, jump at the opportunity to use new technologies because of their novelty and the desire to be among the early adopters, even when the benefits are not necessarily clear.

The problem with framing the conversation around adopting new technologies as a question of “why” or “why not” is that it focuses on personal beliefs and opinions. The best questions to ask about new technologies start with “how.”

How can insurers take the technologies around us, whether they be established, maturing or emerging, and use them for competitive advantage? How can we get the most out of their use, and how can we use them to improve the customer (and employee) experience? How can new technologies be applied to products to make them better and to differentiate our company?

This year’s SMA Innovation in Action Award winners gave us some good examples. For instance, John Hancock’s Vitality Program is using mobile technology, “gamification” and wearable devices (a free Fitbit) to create a highly interactive relationship between life insurer and policyholder. Wallflower Labs is using the Internet of Things to provide brand new preventative services to a specific population of homeowners policyholders: those with aging relatives or young or special needs children, who face increased risk of house fires from the unsupervised use of ranges and cooktops.

Both of these initiatives gather data on policyholder behavior (fitness activities and cooking patterns) that insurers can use to offer premium discounts and leverage to create increasingly personalized life and homeowners products. Haven Life Insurance Agency has taken this thinking a step further by designing a term life product that uses big data and analytics to offer policies online with a 20-minute application process.

These award winners demonstrate just how much can be done toward creating products and modifying existing ones through the creative use of maturing and emerging technologies. John Hancock, for example, models effective decision-making with regard to incorporating new technologies into existing products by offering program members a free wearable device. Wearables can provide behavioral and physiological data that can be used to inform the calculation of life insurance premiums. The same wearables can provide policyholders with valuable feedback and the possibility of earning premium discounts. It’s a win-win for the customer and the insurer.

All insurers looking to incorporate new technologies into their product development should invest in idea-generating processes that are focused on how a given technology can be deployed before deciding whether to pursue that technology. Insurers excel at calculating risks and benefits, after all. Once the potential uses of a specific technology have been determined, insurers can apply that expertise to performing sophisticated cost-benefit analysis on those options.

The Whys and the Why Nots will never agree on everything, but they can unite behind the question of How. That shifts the discussions around new technologies to evaluation and problem-solving rather than opinion and persuasion. Ask “How?” and reap the benefits.

Insurance at a Tipping Point (Part 1)

Since the start of the decade, we’ve encouraged insurers and industry stakeholders to think about “Insurance 2020” as they formulate their strategies and try to turn change into opportunity. Insurance 2020’s central message is that whatever organizations are doing in the short term, they need to be looking at how to keep pace with the sweeping social, technological, environmental, economic and political (STEEP) developments ahead.

Now we’re at the mid-point between 2010 and 2020, and we thought it would be useful to review the developments we’ve seen to date and look ahead to the major trends coming up over the next five years and beyond.

Where are we now?

Insurance is an industry at the tipping point as it grapples with the impact of new technology, new distribution models, changing customer behavior and more exacting local, regional and global regulations. For some businesses, these developments are a potential source of disruption. Those taking part in our latest global CEO survey see more disruption ahead than CEOs in any other commercial sector (see Figure 1), underlining the need for strategic re-evaluation and possible re-orientation. Yet for others, change offers competitive advantage. A telling indication of the mixed mood within the industry is that although nearly 60% of insurance CEOs see more opportunities than three years ago, almost the same proportion (61%) see more threats.

The long-term opportunities for insurers in a world where people are living longer and have more wealth to protect are evident. But the opportunities are also bringing fresh competition, both from within the insurance industry and from a raft of new entrants coming in from outside. The entrants include companies from other financial services sectors, technology giants, healthcare companies, venture capital firms and nimble start-ups.

graph-1

How are insurers feeling the impact of these developments?

Customer revolution

The insurance marketplace is becoming increasingly fragmented, with an aging population at one end of the spectrum and a less loyal and often hard to engage millennial generation at the other. The family structures and ethnic make-up within many markets are also becoming more varied and complex, which has implications for product design, marketing and sales. This splintering customer base and the need to develop relevant and engaging products and solutions present both a challenge and an opportunity for insurers. On the life, annuities and pensions side, insurers could design targeted plans for single parents or shift from living benefits to well-being or quality of life support for younger people. On the property and casualty (P&C) side, insurers could create partnerships with manufacturers and service companies. Insurers could also offer coverage for different lifestyles, offering flexible, pay-as-you-use insurance or providing top-up coverage for people in peer-to-peer insurance plans.

As the nature of the marketplace changes, so do customer expectations. Customers want insurers to offer them the same kind of easy access, show the same understanding of needs and provide the sorts of targeted products that they’ve become accustomed to from online retailers and other highly customer-centric sectors. Digital developments offer part of the answer by enabling insurers to deliver anytime, anywhere convenience, streamline operations and reach untapped segments. Insurers are also using digital developments to enhance customer profiling, develop sales leads, tailor financial solutions to individual needs and, for P&C businesses in particular, improve claims assessment and settlement. Further priorities include the development of a seamless multi-channel experience, which allows customers to engage when and how they want without having to relay the same information with each interaction. Because the margins between customer retention and loss are finer than ever, the challenge for insurers is how to develop the genuinely customer-centric culture, organizational capabilities and decision-making processes needed to keep pace with ever-more-exacting customer expectations.

Digitization

Most insurers have invested in digital distribution, with some now moving beyond direct digital sales to models that embed products and services in people’s lives (e.g., pay-as-you drive insurance).

A parallel development is the proliferation of new sources of information and analytical techniques, which are beginning to reshape customer targeting, risk underwriting and financial advice. Ever greater access to data doesn’t just increase the speed of servicing and lower costs but also opens the way for ever greater precision, customization and adaptation. As sensors and other digital intelligence become a more pervasive element of the “Internet of Things,” savvy insurers can – and in some instances have – become trusted partners in areas ranging from health and well-being to home and commercial equipment care. Digital technology could extend the reach of life, annuities and pension coverage into largely untapped areas such as younger and lower-income segments.

Information advantage

Availability of both traditional and big data is exploding, with the resulting insights providing a valuable aid to customer-centricity and associated revenue growth. Yet many insurers are still finding it difficult to turn data into actionable insights. The keys to resolving this are as much about culture and organization as the application of technology. Making the most of the information and insight is also likely to require a move away from lengthy business planning to a faster and more flexible, data-led, iterative approach. Insurers would need to launch, test, obtain feedback and respond in a model similar to that used by many of today’s telecom and technology companies.

A combination of big data analytics, sensor technology and the communicating networks that make up the Internet of Things would allow insurers to anticipate risks and customer demands with far greater precision than ever before. The benefits would include not only keener pricing and sharper customer targeting but a decisive shift in insurers’ value model from reactive claims payer to preventative risk advisers.

The emerging game changer is the advance in analytics, from descriptive (what happened) and diagnostic (why it happened) analysis to predictive (what is likely to happen) and prescriptive (determining and ensuring the right outcome). This shift not only would enable insurers to anticipate what will happen and when, but also to respond actively. This offers great possibilities in areas ranging from more resilient supply chains and the elimination of design faults to stronger conversion rates for life insurers and more effective protection against fire and flood within property coverage.

Two-speed growth

These developments are coming to the fore against the backdrop of enduringly slow economic growth, continued low interest rates and soft P&C premiums within many developed markets. Interest rates will eventually begin to rise, which will cause some level of short-term disruption across the insurance sector, but over time higher interest rates will lead to higher levels of investment income.

On the P&C side, reserve releases have helped to bolster returns in a softening market. But redundant reserves are being depleted, making it harder to sustain reported returns.

The faster growing markets of South America, Asia, Africa and the Middle East (SAAAME) offer considerable long-term potential, though insurance penetration in 2013 was still only 2.7% of GDP in emerging markets and the share of global premiums only 17%. Penetration in their advanced counterparts was 8.3%. Rapid urbanization is set to be a key driver of growth within SAAAME markets, increasing the value of assets in need of protection. Urbanization also makes it harder for those from rural areas to call on the support of their extended families and hence increases take-up of life, annuities and pensions coverage. The corollary is the growing concentration of risk within these mega-metropolises.

Disruption and innovation

Many forward-looking insurers are developing new business models in areas ranging from tie-ups between reinsurance and investment management companies to a new generation of health, wealth and retirement solutions. The pace of change can only accelerate in the coming years as innovations become mainstream in areas ranging from wearables, the Internet of Things and automated driver assistance systems (ADAS) to partnerships with technology providers and crowd-sourced models of risk evaluation and transfer.

At the same time, a combination of digitization and new business models is disrupting the insurance marketplace by opening up new routes to market and new ways of engaging with customers. An increasing amount of standardized insurance will move over to mobile and Internet channels. But agents will still have a crucial role in helping businesses and retail customers to make sense of an ever-more-complex set of risks and to understand the trade-offs in managing them. On the life, annuities and pension side, this might include balancing the financial trade-offs between how much they want to live off now and their desired standard of living when they retire. On the P&C side, it would include designing effective aggregate protection for an increasingly broad and valuable array of assets and possessions.

Companies can bring innovations to market much faster and more easily than in the past. These companies include new entrants that are using advanced profiling techniques to target customers and cost-efficient digital distribution to undercut incumbent competitors. It’s too soon to say how successful these new entrants and start-ups will be, but they will undoubtedly provide further impetus to the changes in customer expectations and how insurers compete.

In the next two articles in this series, we look at how all these coalescing developments are likely to play out as we head toward 2020 and beyond and outline the strategic and operational implications for insurers. While we’ve set a nominal date of 2020, fast-moving businesses are already assessing and addressing these developments now as they look to keep pace with customer expectations and sharpen their competitive advantage.

What comes through strongly is the need for reinvention rather just adjustment if insurers want to sustain revenue and competitive relevance. As a result, many insurers will look very different by 2020 and certainly by 2025. As new entrants and new business models begin to change the industry landscape, it’s also important to not only scan for developments within insurance but also maintain a clear view of the challenges and opportunities coming from outside the industry.

For the full report from which this article is excerpted, click here.

Life Waiver of Premium Part 2: Optimizing Claim Management Operations

This is Part 2 of a two-part series on waiver of premium. Part 1 can be found here.

Recognizing the need to improve claim management processes in waiver of premium claims, life insurers are turning to technology to replace inefficient operations associated with manual claim processing.

“Insurers today have an opportunity to bring automation into the life waiver of premium adjudication process to improve existing business models,” says Eric Lester, vice president of administrative services at Legal & General America. “It’s about operational efficiency, providing a good consumer experience, and integrating forward-looking solutions that fit the profile [that] business models in the industry should emulate. This is why we’re thinking forward—strategizing as how to integrate these efficiencies into everyday processes.”

Insurers can streamline the claim adjudication process by standardizing procedures to substantially reduce manual claim handling and support lowered risk management outcomes.  This next level of technology not only yields greater improvements in life waiver claim management but also enables insurers to focus on the effectiveness of their claim decisions.

Scope of the Problem

For benefit specialists to effectively manage claims and provide highly personalized results requires access to relevant medical data from multiple sources.  Life waiver claim management requires collecting, collating, and communicating the claimant’s medical notes and pre-disability occupation data to evaluate their current capabilities, restrictions and limitations. The information derived during the initial assessment stage builds a critical foundation for ensuring consistency not only in the initial claim interpretation but in the recertification process, as well.

The handling of restrictions  and limitation (R&L) data, occupational identification information, and policy definitions  continue to follow more traditional manual processing procedures, resulting in claims frequently adjudicated without the required data, or against underwritten policy definitions. Here is what’s happening with manual processing:

manual processing

Insurers rely heavily on the Attending Physician Statement (APS) forms to collect medical status data. However, considering the high volume of claims per specialist and the time involved to manually process them, information contained in the APS isn’t always fully translated. Because of this, forms are often lacking the complete information required to fully understand the claim, based on a fair and accurate assessment of the claimant’s physical capabilities, restrictions and limitations. Moreover, this manual process makes it hard to ensure consistency throughout the duration of the claim.

For example, if the physician states that the claimant is unable to work and fails to provide a written medical basis in the APS forms regarding the decision, benefit specialists are unable to accurately assess and match the claim to the appropriate contractual definition of disability as defined in the claimant’s policy. This process makes it difficult to determine if the liability should be accepted or denied.

Managing the risk throughout the duration of the claim can influence claim outcomes by providing the opportunity for better claim management for both the insurer and the claimant.

The Long-Term Disability & Life Waiver Chokehold

It is not uncommon for consumers to have both their long-term disability (LTD) and life insurance with the same insurance carrier. So, when a person goes on disability, there are essentially two claims open and running simultaneously. The problem is the life waiver claims aren’t being treated as disability claims—which is, in reality, what they are.

What typically happens is the LTD claim becomes the driving force while the life waiver claim takes a backseat, often translating into processing delays. Even though these plans usually reflect two very distinct definitions (LTD claims begin as a two-year “own occupation” plan, while life waiver is usually “any occupation” provision from day one), the life waiver claim sits—waiting to see what the LTD claim is going to do first.  The life waiver claim essentially becomes more of a contractual definition of secondary importance, and consequently is managed as such.

Insurance carriers must be diligent in applying adjudication decisions consistent with what is underwritten in the life waiver provisions of an insured’s policy, and not based on what’s happening with the LTD claim. This has become increasingly problematic as caseloads continue to grow and life waiver claims follow the LTD claim by default, increasing the insurer’s reserve liabilities (i.e., disability life reserves, morality life reserves and premium reimbursement liabilities), and risk exposure.

Unfortunately, once a disability has been accepted on a life waiver claim, there tends to be minimal risk management. Improved risk management in life waiver claims should include best practices that focus on understanding the severity, restrictions and limitations of the claimant, then matching claimant capabilities to the occupational policy terms.

Better Claim Monitoring, Better Results

What’s missing within life waiver processes is the ability to manage the claim block holistically with information derived from all necessary sources, and integrating it into a unified data platform. By doing this, insurers can quickly identify claimants that have occupational opportunities based on their specific physical capabilities, restrictions and limitations, education, experience, and training. But it doesn’t stop there.

Once an occupational opportunity has been determined, insurers can compare these findings to occupations identified by the department of labor and match the capabilities of the claimant to a specific occupation. In addition, medical details surrounding the claim should be updated continually and combined with historical data, as physical capabilities can change over the duration of the claim. This type of automated vocational support allows adjusters to fully evaluate the claimant’s condition for available occupation opportunities.

Considering the thousands of claims that are processed manually by examiners, it can be difficult to ensure that new claims and the recertification of claims are being completed on time, consistently, and in line with risk management best practices. This becomes an almost unmanageable task for examiners as they struggle to maintain the continuity required to reopen, examine, and research individual claims from day one. It is a continual problem because a claim that is approved today may look completely different a year from now.

“With technology, there is a great opportunity for insurers to make operational changes that will systematically improve their current adjudication processes and minimize the insurer’s reserve liabilities,” explains Thomas Capato, CEO of FastTrack RTW Services & Solutions, whose Life Waiver Tool is the first commercially available technology to automate the waiver of premium process. “This next-generation best practice will not only help improve internal productivity for life insurers but allow waiver reserves to be managed properly and improve future actuarial assumptions.”

An automated claim process allows for continual claim management and tracking that’s set to the claimant’s policy terms, ensuring that all follow-ups are done in a timely and consistent manner — without the need for manual intervention.

Summary

Every claim has unique situations, and insurers need to apply the right risk management principles to that particular claim. This can mean the addition of a single automated application, or perhaps a combination of many, internalizing processes to determine the best solution for enhancing risk management outcomes.

“Technology enhances the ability to fully capture specific information surrounding the nature of a claimant’s disability for better risk management within the life waiver block, providing insurers with an accurate profile of the person, the job, and occupational capabilities,” says Lester, at Legal & General America.

It’s time for life waiver processes to utilize technology to manage claims in a more efficient, effective, and standardized manner. By replacing manual claim tasks with the rigor of automated monitoring, insurers have the opportunity to optimize existing processes and improve overall operational efficiencies within their life waiver claim block. Moreover, it is this technology that can make consistent, supportable and repeatable real-time decisions, bringing value to both the insurer and the claimant.

Waiver Of Premium: The Unmanaged Liability

This is Part 1 of a two-part series on waiver of premium. Part 2 can be found here.

Insurance actuaries consider waiver of premium (WOP) a neglected liability — a supplemental benefit rider that has yet to be fully evaluated for risk exposure or cost containment, unknowingly costing individual and group life insurance carriers billions in liability every year.

The problem is that many companies don't have accurate claim management systems capable of reporting what's really happening with the life waiver reserves that are sitting on their books. But with a 44 percent increase in disability claims by people formerly in the workplace1, it's time this largely ignored liability is held up to the light.

Why Companies Need To Pay Attention
Most life insurers aren't fully aware of how much of a liability they're carrying when it comes to their waiver of premium reserves. Moreover, they're even less likely to know critical information such as the number of open life waiver claims, the percentage of approvals and denials, or claims still holding reserves that perhaps maxed out years ago.

Tom Penn-David, Principal of the actuarial consulting firm Ant Re, LLC explains: “There are generally two components to life waiver reserves. The first is active life reserves (for individual insurers only) and the second is disabled life reserves, which is by far the larger of the two. A company that has as few as 1,000 open waiver claims with a face value of $100,000 per policy, may be reserving $25+ million on their balance sheet, depending on the age and terms of the benefits. This is a significant figure when coupled with the fact that many life insurers do not appear to be enforcing their contract provisions and have a higher than necessary claim load. Reserve reductions are both likely and substantial if the proper management systems are in place.”

Unfortunately, by not knowing what's broken the situation can't be fixed. Companies need to examine their numbers in order to recognize the level of reserve liability they're carrying, and to see for themselves the significant financial and operational consequences of not paying attention. Furthermore, a company's senior financial management team may be underestimating the actual number of their block of waiver claims, thus downplaying the potential for savings in this area. Typically, the block of existing claims is much larger than new claims added in any given year, and often represents the largest portion of overall liability.

“Life companies are primarily focused on life insurance reserves and not carefully looking at waiver of premium,” Oscar Scofield of Factor Re Services U.S. and former CEO of Scottish Re., says. “There could be a significant reserve redundancy or deficiency in disabled life reserves and companies need to pay attention to recognize the impact this has on their bottom line.”

To illustrate this point, let's take a quick look at the financial possibilities for a company with even a small block of life waiver claims:

Example – Individual Life Carrier Current Reserve Snapshot With Proactive Management
Number of Open WOP Claims 1,000 1,000
(*) Average Disability Life Reserves (DLR) $19,989,255 $19,989,255
(*) Average Mortality Reserves $3,046,722 $3,046,722
Average Premiums Paid by Carrier on Approved WOP Claims $754,427 $754,427
Average Total Reserve Liabilities $23,790,404 $23,790,404
Claim Approval Percentage 90% 60%
Reserves Based on Approval Percentage $21,411,364 $14,274,242
Potential Reserve Savings $7,137,121

* The above reserve data is based on Statutory Annual Statements.

As you can see, even under the most conservative scenarios, the reserve savings are substantial when a proactive waiver of premium claim management process is put into action.

Industry Challenges
The National Association of Insurance Commissioners (NAIC) requires life companies to report financials that include both the number of policyholders who aren't disabled with life waiver, as well as reserves for those who are currently disabled and utilizing their life waiver benefits. But many items, like the number of new claims or the amount of benefit cost are not reported. Moreover, companies rarely move beyond these life waiver reporting touch-points to effectively monitor their life waiver claim management processes or to identify the impact of contract definitions on their claim costs.

The new and ongoing volume of claim information, manual processing, and the fact that life waiver claims involve months if not years of consistent, close monitoring, is humanly challenging — if not impossible. For example, it's not out of the ordinary to have only a few people assigned to process literally thousands of life waiver claims.

It's unfortunate, but this type of manual claim reporting continues to remain unchanged as claim personnel (working primarily off of three main documents: the attending physician's statement, the employee statement, and the claim form), quickly push claims through the system. The process is such that once these documents are reviewed (and unless there are any questionable red flags), the claim continues to be viewed as eligible, is paid, and then set-up for review another 12-months down the road. As long as the requests continue to come in and the attending physician still classifies the claimant as disabled and incapable of working, there isn't much done to proactively manage and advance the claim investigation.

An equally challenging part of the life waiver claim process is working off the attending physician statement — both when claims are initially processed, as well as when they are recertified. Typically very generic in nature, the statement often only indicates whether or not the claimant is or continues to be unable to work. This problematic approach essentially permits the physician to drive the course of the claim decision away from the management of the insurance company. The insurer, who is now having to rely on the physician's report to fully understand and evaluate the scope of the claimant's medical condition, has little information in which to manage the risk.

For example, did the evaluation accurately assess the claimant's ability to work infrequently or not at all? Are they able to sit, stand, walk, lift, or drive? If so, then what are the specific measurable limitations? Is there potential to transition them back into their previous occupation or into an occupation that requires sedentary or light duty — either now or in the near future? In order for companies to move beyond the face value of what has initially been reported, and to monitor where the claimant is in the process, they need to build better business models.

Closing The Technology Gap
The insurance industry as a whole has always been a slow responder when it comes to technology. But for companies to optimize profitability, closing the gaps in life waiver claim management and operational inefficiencies will require a combination of technology and human intervention. Investing in the right blend of people, processes, and technology with real-time capabilities, can substantially reduce block loads and improve overall risk results.

Constructing a well-defined business model to apply standardized best practices that can support and monitor life waiver claims is critical. The adjudication process must move beyond obvious “low hanging fruit” to consistently evaluate the life of the claim holistically. It means not only examining open claim blocks, but also those that are closed, to better identify learning and coaching opportunities to improve future claim outcomes.

Additionally, segmentation can provide great insight into specific areas within the block, by applying predictive modeling techniques. It can evaluate how claims were originally assessed, the estimated duration, and why a claim has been extended. For example, was there something regarding the claim that occurred to warrant the extension of benefits such as change in diagnosis?

Predictive modeling also looks at how certain diagnoses are trending within the life waiver block, so if anything stands out regarding potential occupational training opportunities, benefit specialists can effectively introduce the appropriate vocational resources at the right time for the insured.

Capabilities to improve outcomes in waiver of premium operations through technology and automation should include these three primary assessments:

  • Financial: Companies need to start looking at waiver of premium differently. They need to continually evaluate the declining profit margins on in-force reserves in order to identify the impact on profits. Even if a waiver of premium reserve block is somewhere between 10 and 200 million dollars, potential savings are likely to be 10 to 20%. Better risk management tools can substantially control internal costs and improve reserve balances.
  • Operational: Current business models have to move beyond the manual process to steer the claim down the right path from start until liability determination. Standardized automation brings together fragmented, disparate information systematically across multiple platforms, essentially unifying communications between the attending physician and the insurance company. This well-managed infrastructure gathers, updates, and integrates relevant data throughout the life of the claim.
  • Availability: A critical way to improve the life waiver claim process is through accurate reporting. By breaking down the silos between the attending physician, case manager, and the insurance company, claim related information can immediately be uploaded and reported in real-time. Proactively enhancing the risk management process to enable companies to consistently receive updated claimant health evaluation and physical limitation reports, is critical for best determining return-to-work employment opportunities.

Three Technology Touch-Points in Waiver of Premium Operations

Front end: Assessment of the initial claim and determining the best possible duration time.

Mid-point: An open claim should be reassessed to determine continued eligibility and to evaluate the direction of the claim if lasting longer than projected-and why.

End-point: The evaluation process continues to ensure claims are being re-evaluated at regular intervals, examining the possibility of getting the claimant back to work.

Why Waiver Of Premium Matters
What's typically happening is that most company's life claim blocks are managed on the same platform and in the same manner as their life claims, so ultimately the life waiver block is improperly managed. Life companies need to recognize that a waiver of premium block is not a life block but a disability block, and needs to be managed differently. For example, older actuarial tables do not reflect the fact that people with disabilities are living longer, potentially leaving companies with under-stated reserve liabilities.

Ultimately, having a good handle on the life waiver block will prove beneficial for both the carrier and the insured.

Part 2 of this series will discuss specifically how the introduction of process and technology into this manual and asynchronous area can deliver substantial benefits to life carriers.

1 Social Security Administration, April 2013.