How Reinsurers Can Help Group Insurers In Changing Times
Already challenged by their own needs to manage costs and maximize return on capital, group insurers also confront a changing benefits landscape largely impacted by rising health care costs. These realities in turn prompt changes in a seemingly unrelated areagroup life and accident benefits.
Employers, squeezed by high health care premiums that take a bigger slice of a fixed benefits pie, are calling for more creative and cost-efficient group benefits packages. As a result, insurers are tweaking the pricing and product offerings of their group life and accident coverages. Requests for higher supplemental and voluntary coverage amounts and other expanded benefits are on the rise.
At the same time, insurance companies are exploring ways to fine-tune their own processes, products and pricing as they look to heighten their financial performance to meet rising investor expectations for returns on capital. The bar continues to move higher as analysts often now look beyond whether or not companies are growing profits to also consider how companies stand against their peers in capital returns.
Insurers efforts to achieve internal financial efficiencies while responding creatively to their customers needs has one important impact to reinsurers: increasing demand for consulting services. There are more opportunities for reinsurers that are able to bring market-wide data resources, sophisticated risk-modeling tools, product development know-how and the perspective of their own risk-taking business to their insurance company clients through consulting services.
Insurers turn to reinsurance partners for help on a wide range of issues. Three years after 9/11, many insurers still are working through concentration of risk issues, an arena where few have built solid tools to help analyze and manage ceded risk. Insurance companies also are increasingly looking to fill gaps in their product lines “on the fast track,” or particularly, to reconfigure their plan designs to meet the needs of employers. Reinsurers are an important resource for both of these needs.
The job is often a complex one with many moving parts such as guarantee issue maximums, overall maximum limits, grandfathered program benefits, retiree coverage, special riders, exclusions and a host of other concerns. Thoughtful plan designs need to meet clients needs but also fulfill the financial strictures of the insurer and the reinsurer.
Todays market requires insurance companies to be even more flexible and responsive, to quicken the pace of change and yet come to prudent decisions that suit the marketplace and their own bottom lines. Theres no wonder that insurers are looking to their consulting resources for help.
As the industry quickens its pace, reinsurers have the opportunity to show their merits, not only as partners in risk management, but also as sources of pricing and product know-how. Because cost-reduction continues to pervade the industry, insurers faced with an upswing in product development and initiatives are turning to full-service reinsurers to meet this need.
This increased demand for consulting services reflects the sheer competitiveness of the group benefits marketplace and a new sense that one size does not fit all, if it ever did. This means reinsurers are seeing more requests for unique solutions, exceptions to underwriting guidelines and an increase in facultative submissions.
Ultimately, the goalwhether in creating new customer solutions or managing pricing and retentionis to help insurance companies manage their financial results while providing affordable benefits to their clients. For reinsurers with the tools and resources, there is a real opportunity to help insurance organizations succeed in this high-pressure environment.
Scott Machut, vice president, group life reinsurance, and Jim Rathburn, vice president of business development, are members of the Life, Accident and Specialty Reinsurance team of ING Re in Minneapolis, Minn. They can be reached at Scott.Machut@ing-re.com and James.Rathburn@ing-re.com.
Reproduced from National Underwriter Edition, January 27, 2005. Copyright 2005 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.