Group Cover: Income Protection
OESAI Life Insurance Technical Training: Harare, April 2015
Adriaan Rowan, FIA
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Topics covered in the presentation
> Quick overview of Group Market in SA
> Group Business Process
> Products offered
> A focus on Income Protection
Product
Design
- Product design
- Quotes
Claims
Assess
- Underwriting
Quotes
- Claims assessment
> Additional staff skill requirements
> Recent developments
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Under
writing
Overview of Group Market in SA
> Size of Group Market in SA
– Total Premiums = R 189 Billion; Reinsured = R 2.1 billion
> Size of Gen Re’s Group Premiums
– Total = R600 million or 28% of All premiums
– PHI share = R270 million or 47% of Group premium
• Gen Re’s Premiums split of business
2,000,000,000
1,800,000,000
1,600,000,000
1,400,000,000
1,200,000,000
1,000,000,000
800,000,000
600,000,000
400,000,000
200,000,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Indivdual Life
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Group
Group Business Process
Broker approaches
insurers for quote
Scheme priced, FCL
decided – quote
provided
Annual rebroke
Input from
reinsurers
Claims assessed
UW members over
the FCL
OESAI, Zimbabwe 2015
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Product variation offered
Group products
Family Cover
Rider benefits
Benefit Option
Individual
Flexi Cover
Income
Replacement
Spouse and Child
Conversion
option
Lump Sum
Retrenchment
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A Focus on Income Protection
Group products
Family Cover
Rider benefits
Benefit Option
Individual
Flexi Cover
Spouse and Child
Conversion
option
Retrenchment
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Income
Income
Replacement
Protection
Lump Sum
Product
Design
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Income protection design
> Two IP products: similar but
– TTD pays for limited period (usually 24 months) and RR up to 100%
– PHI pays for longer than TTD (usually until retirement) and RR usually 75%
IP Product feature
Variations
Common practices
Income replacement
Usually 75% of salary on disability
after waiting period
Some insurers offer 100%
Waiting Period
3 or 6 months
1, 3 , 6 or 12 months
Disability definition
- Own occupation with own
employer
- Own or alternate occupation with
any employer
-
Escalations
Inflation
Inflation + x%
Inflation up to a limit
Retirement Age
65
60, 63, 65 years
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Activities of Daily Work
Activities of Daily Living
Product design – Additional terms
Other key terms to consider
> Eligibility criteria
– Actively at work clause
> Exclusion clauses:
– pre-existing conditions: members claiming within 12 months of joining a scheme
– standard (self-inflicted injuries / suicide in first 2 years / illegal activities etc)
– travel?
– hazardous Pursuits?
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Quotes
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Quotes Stage Factors
> Relevant Factors in rating a quote – One rate for all
– Scheme’s age and gender profile
– Scheme’s salary profile
– Type of industry
– Basic mortality table
– AIDS mortality
> Determining the FCL:
– Nature of Scheme / Industry
– Size of Scheme
– Distribution of income and sum assured within scheme
– Profitability of the scheme
– Market Competition
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Under
writing
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Underwriting requirements
> Only members above the FCL are underwritten*
> Travel & Pursuits and Financial UW
> Requirements increase with age and benefit size
Sum Assured over FCL pm
Ages <= 35
Age 36-49
Age 50-65
R0 – R10,000 p.m.
1
1
2
R10,001 – R20,000 p.m.
1
3
4
R20,001 – R50,000 p.m.
3
4
4
>R50,001 p.m.
5
6
7
> Advance / Forward cover
> Individual vs Group UW
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Underwriting results
> Possible UW decisions
– Accept
– Load premium rate*
*loadings usually applied to the portion over FCL (but depends on admin)
– Exclude certain risks
– Require more tests
– Restrict cover to FCL (decline)
> Waiving of UW loadings
– Admin simplicity
– Better message to member/broker
– Price implication
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Underwriting Process
Focus areas in SA
> Efficiency, Convenience & Speed of service
– Travelling nurse services
– Online completion of Declaration of Health questions by member
– Insurer accessing medical information from their Doctor
– On site underwriting by senior underwriters
– Tele-interviewing & Auto-underwriting
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Claims
Assess
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Claims
> Claims assessed for all members (under/over FCL)
> Initial Claims assessment
– checks: is waiting period up; actively at work at inception
– obtain standard claims requirements
• claim forms by member, employer & doctor
• relevant medical reports from treating doctor
– Claim size under FCL: check for pre-ex conditions
– Claims size over FCL: check UW terms, check for non-disclosure
– assess claim against product definition
– possible claims decisions: admit/decline/defer/requirements
• additional requirements may be a functional capacity
assessment or work site visit
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Claims
> Claims Reviews
– ongoing monitoring of longer term claims
– requirements depend on severity of medical condition
• minor (eg. leg fracture): up to date medical exam by treating
doctor/occupational therapist/physiotherapist
• intermediate (eg. spine injury): medical reports by treating health
professionals / functional capacity evaluation / work site evaluation
• serious (eg. severe stroke): certificate of continued existence
> Individual Case Management
– for claims that have potential to be longer term
– for ‘red flag’ or suspect claims
– where intervention is likely to be effective
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MD Guidelines
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Claims Process
Focus areas in SA
> Efficiency, Convenience & Speed of service – same as for Underwriting!
– Online completion of claim forms by member / employer
– Tele-claims
> Other
– Settlements
– Confidentiality issues
– Gather & analyse Management Information:
– feedback in to the underwriting process
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Additional skills requirement to manage IP
Managing PHI business requires the follow skills:
Underwriting
> Cases are more complex to assess - conditions not previously an issue could cause a claim
> Costs and time necessary to underwrite a case are higher - typically need:
– medically trained people (physio / OT / nurse / lab technician) who understand insurance
products and underwriting principles
Claims
> Long claims periods require initial assessment plus ongoing follow ups and case management
> Experienced staff required to be able to identify warning signs and ‘fraudulent’ activity
– OTs are hired frequently, sometimes Physiotherapists as well; also need insurance knowledge
Actuarial
> Experienced staff required to manage the increase in pricing and reserving requirements
> More data and analysis are needed in order to correctly calculate the premium rates
Administration
> Generally more intense than on lump sum products
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SA Group Claims causes
Top 10 Group PHI 2004-2006
25%
20%
15%
10%
2004
5%
2005
2006
0%
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SA Group Claims causes
Top 10 Group PHI 2010-2012
25%
20%
15%
10%
2012
5%
2011
0%
2010
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What we see
> Less formal employment
> More self employed
> Highly skilled
– No longer best class of life
– More stressed
– Lifestyle diseases
– Psychiatric
> Is HIV still the biggest concern on Group disability
claims?
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Social media & technological advances
> Enabling fundamentally different approaches that allow
us to “see into a group” and adapt
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Conclusion
> In South Africa Group business is a R189 Billion industry
> Group products can take many different forms
> Options offered should reflect availability of
– Actuarial data to price
– Underwriters to evaluate the risk
– Claims assessor to identify valid claims
> Main cause of claims are constantly changing – need to adapt
> Analytics and use of social media gives new options
OESAI, Kenya 2014
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Disclaimer
This presentation is protected by copyright. All the information contained in it has been very carefully researched
and compiled to the best of our knowledge. Nevertheless, no responsibility is accepted for its accuracy,
completeness or currency. In particular, this information does not constitute legal advice and cannot serve as a
substitute for such advice. It may not be duplicated or forwarded without the prior consent of the Gen Re.
Diese Präsentation ist urheberrechtlich geschützt. Alle hierin enthaltenen Informationen sind sehr sorgfältig
recherchiert und nach unserem besten Wissen zusammengestellt. Dennoch können wir keine Haftung hinsichtlich
ihrer Genauigkeit, Vollständigkeit oder Aktualität übernehmen. Insbesondere stellen diese Informationen keine
Rechtsberatung dar und können auch nicht als Ersatz für eine solche Beratung dienen. Eine Vervielfältigung oder
Weiterleitung ist nur mit vorheriger Zustimmung der Gen Re gestattet.
OESAI, Kenya 2014
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