In December, Prudential Financial began offering 10- and 15-year term life policies to a community that (in the U.S.) had been largely shut out of the life insurance market: people living with HIV. The product rollout stems from an unusual partnership with Aequalis, an independent organization that conducted extensive research into the feasibility of availing the HIV community of life products.
In addition to providing data underpinning the unique launch, Aequalis also manages the application process on behalf of Prudential and its agents. To learn more about the initiative, LifeHealthPro Senior Editor Warren S. Hersch recently interviewed Mike McFarland, chief underwriting officer of Prudential Individual Life Insurance. The following are excerpts.
Hersch: How did Prudential team up with Aequalis? What spurred the alliance?
McFarland: About five years ago, when we began exploring the possibility of insuring individuals living with HIV, we didn’t have a lot to go on. We could form an opinion respecting the statistical mortality of these individuals, but as we hadn’t previously insured people with HIV, we had no way to validate the opinion. At best, it was informed guesswork.
Then about 18 months ago, we got together with Aequalis at the request of one of our major reinsurers, Munich Re, to discuss our willingness to insure individuals with HIV. This was more possible than five years ago because Aequalis had done so much research related to statistical mortality for these people. Leveraging mortality experience data from Munich Re — which has sold life insurance to some in the community internationally — Aequalis developed a profile of an insurable HIV-positive applicant in the U.S.
Hersch: How specifically did Aequalis’ research complement that of Munich Re?
McFarland: Munich Re’s mortality experience helped us to validate what we believed in some areas and guide us in new directions in others. Aequalis also provided mortality experience data, but the company additionally did a tremendous amount of demographic research and modeling on the HIV community. So they bought to the table a broad-based package — and that was key for us.
Hersch: So how might the profile of a typical HIV-positive policy applicant compare to someone of otherwise good health?
McFarland: People living with HIV are still at high risk. But it's safe to say that they’re roughly as insurable as those with significant diabetes or cardiac disease. Assuming a $250,000 face amount for a 10-year term policy, the average premium for an HIV-positive woman, age 45 and non-smoker, would be about $1,600 annually.
This isn’t a standard rate. But considering that we’ve never before sold life insurance to those living with HIV, the new coverage is a very positive step forward.
Hersch: How large of an HIV-positive applicant pool might we be looking at?
McFarland: There are roughly 1.2 to 1.3 million individuals living with HIV in the U.S. Factoring in those who are insurable, wish to purchase life insurance and can afford to buy a policy, the prospect base is probably around 10 to 15 percent of the total.
Hersch: Do drug treatments vary significantly among HIV patients. And, if so, how might this impact the underwriting decision?
McFarland (pictured at right): A number of drugs are used in combination to treat HIV. But, which ones doctors favor is very much dependent on how an individual responds to a treatment. You may start with one regimen, see little or no improvement, then shift to another regimen and see significant improvement.
The medical community begins, as they would any disease, with a baseline approach, then adjusts that approach, depending on the outcome. As to underwriting, Prudential doesn’t favor one drug regimen over another.
Hersch: To the extent that HIV-positive individuals are also taking marijuana to mitigate pain, might this throw a chink into your risk assessment, given outstanding questions about health outcomes stemming from marijuana use?
McFarland: Since we just started underwriting individuals with HIV, we're still learning about the effectiveness of various treatments and drugs — including marijuana — that patients may be using in conjunction with these treatments. We’ve haven’t yet seen enough data in medical records to form an opinion about marijuana use among HIV-positive applicants.
That said, our approach to medicinal marijuana is straightforward: If a physician prescribes the drug for a specific purpose, then we treat it as we would any other drug prescribed for a specific purpose. We don't underwrite the drug; we underwrite the underlying cause or medical condition.
Hersch: Is the offering of life insurance to HIV-positive applicants limited to certain individuals or open-ended?
McFarland: It's open-ended. But we’ll closely be monitoring new cases — the quality and source of new business, medical histories and other factors considered in underwriting. We’ll then make adjustments over time so that new policies better reflect our claims experience.
Hersch: Is Prudential unique in offering life insurance policies to those in the HIV-community?
McFarland: We believe that we’re the first to offer life insurance to this community on a broad basis. We now have the resources and data to make it happen; it was the right thing to do at this time. My sincere hope is that other life insurers will follow suit.
Hersch: Is Prudential exploring other medical conditions currently uninsurable because of a lack of a data — conditions that might also benefit from research like that spearheaded by Aequalis? Or do you see the HIV applicant pool as unique?
McFarland: The alliance with Aequalis builds on Prudential’s underwriting improvement process. Our medical directors continually monitor clinical data on any number of diseases and impairments.
We’re always looking to see whether the science or treatment of a disease has changed to warrant an improvement to our underwriting. Some improvements are more extensive than others — this one involving HIV-positive individuals was clearly a big one. But on average we make four to eight improvements to underwriting on an annual basis.
Hersch: Might such future improvements include dynamic pricing, where you adjust premiums to real-time data about policyholders? I’m thinking, for example, of a recent initiative of John Hancock to send policyholders a free Fitbit that tracks their health-related activities. Data the insurer receives from the device can be used to offer premium or other discounts to those customers who meet certain benchmarks.
McFarland: This is within the realm of the possible. Underwriting in general in the individual life space is changing — and not just in respect to HIV.
The risk selection process we use is pretty much the same as it has been since I trained as an underwriter 36 or 37 years ago. It's become a bit more complex, but the fundamentals of the model are the same.
That model has worked well; it's very reliable in predicting outcomes. That said, a younger generation of consumers is not particularly happy with it. They don't like being asked intrusive questions or having a paramedic sticking a needle in them to draw a blood sample.
They want, in short, a better customer experience — and not just during medical underwriting. John Hancock’s initiative is evidence that other insurers are taking initial steps in this direction.
Hersch: What will the Prudential-Aequalis initiative mean for our readers, life insurance agents and advisors?
McFarland: For one, they should expect a smooth application process. Aequalis has a very informative web site and professionals who can help producers deal with sensitive issues involving individuals living with HIV, including questions that may arise during a client engagement or underwriting.
Also, HIV is probably the only disease that is regulated by a good number of states. Insurers have to take care to be compliant with state regulations related to HIV in terms of what can and cannot be asked on policy applications. Aequalis can help with the process to ensure compliance with these state regulations.
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