As the industry continues to parse underwriting categories and develop new products, pinpointing mortality will become more critical, say executives at Swiss Re Life & Health America, Stamford, Conn.
Toward that end, building a base of data will become more important, says Weldon Wilson, CEO of Swiss Re Life & Health America.
Part of the key to understanding mortality is examining it from the perspectives of an actuary, underwriter and a medical director, adds Tracy Choka, senior vice president and director of applied research and development with Swiss Re Life & Health America. In effect, this means developing a “collective knowledge.”
A major question is whether mortality trends will continue to improve.
That is a difficult call, according to Choka, who says the direction is unclear because of both positives and negatives that are turning up.
Some of the positives, Choka says, are improvements in cardiovascular trends as well as the availability of more genetic information.
Another positive is the decline in smoking. The 1975-80 mortality tables indicate a 30% prevalence for smoking, a total that declined to 8-10% in the 1990-95 table.
But, she adds, potential uncertainties regarding mortality may include trends in infectious diseases as well as a greater prevalence toward obesity.
But even on the issue of obesity, there are offsetting factors, Choka continues.
While new drugs and education could drive some improvement in containing the trend, “it is a lifestyle or behavioral component as with smoking,” she adds.
So, it might take time before those benefits are realized, Choka says. For instance, it took about 25 years before the benefits of coronary bypass surgery were fully realized.
Because of these mixed signals, it is important for insurers to take care when fine-tuning preferred risk underwriting categories, she continues. “As an industry, we have got to really watch it.”
That means keeping abreast of factors such as medical technology, she says.
But it is important to underwrite cost effectively, Wilson adds. For example, using an attending physicians statement may cost $50 compared with other tools such as a motor vehicle report that could cost $7, he says. Keeping track of costs is important because in a competitive market, insurance companies need to be able to offer policies at an affordable rate, he notes.
The use of preferred classes also depends on what geographic areas and distribution an insurer is targeting, according to Choka.
The distribution methodbroker, career agent and Internet, for exampleas well as changes in field underwriting, could alter mortality, Choka says.
What will help insurers offer new products going forward is a focus on basics including strong underwriting and pricing, she adds.
Reproduced from National Underwriter Life & Health/Financial Services Edition, January 23, 2004. Copyright 2004 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.