Reinsurers Services Proliferate
Newer. Better. Faster. Reinsurers say they are focusing their efforts on making this mantra a reality for direct writers.
Technology and product support are two areas that reinsurers and at least one direct writer cite as tangible ways reinsurance companies are meeting these goals.
Know-how now includes not only expertise in mortality experience but also an ability to harness technology, says Roberto Baron, vice president and senior actuary, with MetLife Inc., New York.
Technological know-how makes it easier for an insurer to sell more insurance, he adds, and direct writers can now get real-time answers with a turnaround of a couple of hours.
For instance, RGA, St. Louis, a reinsurer in which MetLife owns a 59.1% interest, is testing a predictive modeling application in conjunction with BioSignia Inc., Durham, N.C., called mortality assessment technology (MAT). RGA says MAT will fine-tune preferred risk underwriting.
The model creates a template for measuring the predictive onset of disease and predictive mortality due to chronic diseases, according to Wayne Adams, a senior vice president with RGA. The effort has been under way for about a year. Testing started over the summer.
The new model creates a predictive mortality ratio for individual contracts and uses that ratio to rank individuals according to when they are likely to die, he says.
MAT is just one of the technological efforts RGA says it is offering. It is also making available FAC App electronic submission software, a nonproprietary product that, through its e-business unit, allows direct writers to submit facultative underwriting applications electronically to all reinsurers, track their status and get responses back from reinsurers, Adams adds.
RGA also continues to implement a system that is being offered globally. The Automated Risk Underwriting Analysis system will make it possible for direct writers to process treaties online, he says. Because the system uses a series of “drill-down” underwriting questions, it can be used by direct writers to sell insurance through telemarketing.
The system has worked in countries like the United Kingdom, he explains, because bank sales are more common, smaller face amounts are sold and, consequently, there are fewer underwriting criteria.
In addition to technological offerings, Adams says it is possible that additional support will be offered on universal life and term products to meet demands created by the Valuation of Life Insurance Policies model regulation, also known as Guideline Triple-X.
However, he says support for UL products will be strictly for mortality risk and not for secondary guarantees because of the long-term nature of such a risk.
Other areas RGA is looking at, he says, are long term care and critical illness insurance. The LTC market is still developing, Adams says, and while there is international experience for critical illness products, factors such as the U.S. health care market and litigation add unique features to the market here.
Critical illness is an area to which Optimum Re, Dallas, has been devoting resources, according to Bob Thomas, chief marketing officer.
Both development of products such as a mortgage product with a critical illness component and support for a direct writer once those products are developed are important pieces of providing service, he adds. Support is offered by spending time with the field force, helping them to market the product, he says. So, it is really “training the trainer,” according to Thomas.
Inspiring the field force is particularly important for smaller and mid-sized insurers that may not be able to devote internal resources to education, says Sheila Matheson, vice president-critical illness marketing with Optimum Re.
The nuts and bolts of product development involve understanding how pricing and other factors make a product competitive in the market, says Pat Kelleher, executive vice president and CFO of Transamerica Re, Charlotte, N.C.
For instance, Kelleher says that designing term products makes up a big part of the reinsurance services market. Designing a term product means it is necessary to keep costs down and to keep the product simple, he adds. So, careful consideration is needed before deciding to add any bells and whistles, according to Kelleher.
Technology, such as an electronic data interchange, is helping lower costs and reduce turnaround time for life insurance sales, he continues.
This is not simplified issue, he notes, but rather, traditional underwriting with new technology that is now being tested.
Transamerica Re will be conducting live tests in fourth quarter of this year with a targeted implementation for 2004, he says. Initially, tests will be conducted on term products, Kelleher continues.
Another area of product development that is becoming more popular among direct writers and those not directly in the insurance industry, is the private label product supported with administrative services, Kelleher adds.
More automatic underwriting that helps better serve the middle market is an area reinsurers are offering abroad and will start to offer domestically, according to Curt Hagelman, senior vice president and chief marketing officer with Hannover Life Re, Orlando, Fla.
An underwriting assessment system currently available in several foreign markets that helps reach the middle market will be used here as well, he adds.
Hagelman also distinguishes between simplified issue and traditional underwriting that is made more facile through the use of “drill-down” questions.
In addition to improved underwriting processes, a reinsurer needs to make sure a direct writer is not just keeping up with the competition and that the products it is offering really makes sense for that company based on factors such as size, explains Jeff Burt, a vice president of marketing with Hannover Life Re.
But if a product does make sense for a company, a reinsurer can add value, he continues. For instance, a reinsurer can provide actuarial knowledge and support for companies facing new regulations such as Guideline AXXX, which addresses UL products with secondary guarantees, says Burt.
And, according to Chris Noyes, head of client product solutions with ING Re, Denver, since a new CSO Table for reserving is coming into effect, reinsurers can provide a valuable service by advising companies on an appropriate approach to satisfy the Tables requirements. It may be a good time for companies to look at their products and rework them if they are “stale,” he says.
Product support can range from work in relating X-factors associated with the Tables to a broader product review, he continues. Reinsurers provide the statistical modeling and the expertise on mortality that is needed to support X-factors used to determine necessary reserves. Reinsurers have developed the expertise of understanding mortality while many life insurers have focused on asset management, he explains.
Annuity mortality expertise, an area that ING Re could participate in at some point in the future, Noyes says, is different than understanding life insurance mortality because it is more self-selected. There is no underwriting and customers generally know their health, he explains.
Part of the decision to work with a reinsurer on a broader review depends on the direct writers philosophy. Thus, a company that markets itself as offering more cutting-edge products would consider it more important to reevaluate its product line.
The speed with which a carrier reevaluates a product line also depends on the type of product sold, according to Noyes. From a tax perspective, the new Table affects the amount of money that can be put into a universal life and variable universal life product, so carriers selling these products may delay implementation until the 2009 ultimate required date.
However, carriers selling in the competitive term life market may want to evaluate their products right away, he says. With certain applicants, such as male nonsmokers, the CSO should help by reducing required Triple-X term reserves, he adds.
Reproduced from National Underwriter Life & Health/Financial Services Edition, October 10, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.