You don’t often hear from a major U.S. life insurer about advances in medicine and underwriting that spur new products. So the December 2015 announcement by Prudential Financial that it was rolling out new 10- and 15-year individual convertible term life products for people living with HIV was certain to get the industry’s (and the public’s) attention.
But the product unveiling couldn’t have happened without significant advance work spearheaded by Prudential’s partner in the rollout, Aequalis. Kick-started in 2010, the company’s mission is to “eliminate barriers and create an equal playing” for those among an estimated 1.2 million-plus individuals in the HIV community who need life insurance.
The operative term in the above quote, “equal,” inspired the company’s name. It also helps to explain the passion driving Aequalis’ co-founders, President Bill Grant and CEO Andrew Terrell.
For Grant, the personal dimension to his interest in serving the HIV community is particularly emotional. Four family members were affected directly. Two passed away at a young age from AIDS-related complications. One lives openly with HIV, but has suffered from the stigma. For Grant’s brother, Michael, an Aequalis partner and marketing director, the humiliation has a financial element.
“What spurred my quest was Michael’s inability to buy a life insurance policy because of his [HIV-positive] status,” says Grant. “That puzzled me because, since being infected, he’s maintained a strong medical regimen and has been in excellent health.”
The closed-door policy of U.S. insurers contrasted with the availability of life insurance for HIV-positive applicants abroad, including the country with the world’s highest HIV infection rate: South Africa. Soon after Aequalis’ launch, Terrell spent 18 months developing mortality and actuarial data for more than 4,000 HIV-positive individuals living in South Africa, as well as European countries where life insurance for the HIV community can also be purchased.
One notable conclusion of the research: A 45-year-old man living with HIV has nearly an identical life expectancy as a 54-year-old male smoker. Armed with this data, Grant and Terrell approached Munich Re, a Prudential Financial reinsurer, to present their findings in 2012.
Intrigued, Munich Re’s actuarial experts thereafter validated Aequalis’ premise — that U.S. carriers could economically insure the HIV population within certain underwriting guidelines — then went to work developing premium rates for this risk class. To that end, Munich Re supplemented Aequalis’ work with its own extensive data (claims and mortality results for tens of thousands of HIV-positive individuals) much of this data again originating from South Africa.
Why was all this research necessary, given that carriers abroad were already insuring people in the HIV community? Couldn’t their U.S. counterparts simply have adopted the risk premium rates and underwriting parameters then in use?
“While the [international] data is significant, the medical regimens in places like South Africa vary from those of the U.S., as do the life insurance products available,” says Terrell. “For instance, in South Africa, an insurer can cancel a contract if the policyholder doesn’t follow a prescribed drug regimen.
“In the U.S., you can't do that,” he continues. “So there are significant differences that have to be built into the risk assessment for U.S. policy applicants.”
To tailor its pitch to the U.S. market, Grant adds, Aequalis had to retrofit its data to policies and life expectancy tables used by American carriers. That would enable two applicants — one living with HIV and one without — to be channeled through different underwriting tracks, but purchase insurance contracts with identical terms and conditions.
Aequalis had other challenges to surmount. One was developing an airtight process to guard against “headline risk.” Terrell says Prudential plc. of the U.K. (no connection with the U.S. insurer) was “totally unprepared” for what followed a 2009 debut of a life product for HIV-positive applicants: an onslaught of inquiries, inordinate time spent on underwriting and bad press stemming from a high app rejection rate.
Aequalis’ underwriting also had to comply with regulations of 50 state insurance departments, most of which have passed stringent rules respecting HIV-positive applicants. Among them: regs covering questions that agents may not ask during a fact-finding (such as an applicant’s HIV status or tests results), disclosure of underwriting criteria and who may be covered by a policy.
Undaunted, Aequalis invested heavily in a compliance-friendly process (including a web platform) for educating prospects about available coverage, policy provisions and costs, plus underwriting criteria. Thus informed, prospects can request an appointment with an Aequalis call center agent to complete an application.
“We developed a process that lets applicants self-identify, that is, determine whether they believe they meet the criteria without us having to ask directly about their HIV status,” says Terrell. “If it appears that they meet the criteria, we'll initiate a formal application.”
“The whole application process is regulatory-compliant,” adds Grant. “And given the information we provide applicants about coverage, our expectation is that the rejection rate will be low for those who follow through.”
In addition to compliance training, Aequalis also avails insurance agents — those at the call center or, alternatively, Prudential-affiliated agents also certified to sell to HIV-positive applicants — with sensitivity and awareness training. The all-day instruction examines the history of HIV, truths and myths about the virus and the resulting auto immune deficiency syndrome (AIDs), as well as best practices to follow when engaging applicants.
With the Prudential term policies now on the market, Aequalis’ co-founders are now exploring opportunities where their expertise may find other profitable outlets. These potentially include additional insurance products tailored to those in the HIV community or solutions for individuals living with other chronic conditions.
“Our research methodology is probably applicable to other treatable diseases today — from cancer to diabetes — for which carriers don’t now provide coverage,” says Terrell. “I do think our work studying those living with HIV holds promise for insuring people with these other chronic conditions.”