Insurance Market Shifts Squeeze Product Experience Studies

Two nonprofit groups have warned state insurance regulators that market shifts may reshape the supply of life insurance, health insurance and annuity product experience data.

Cindy MacDonald, a senior director at the Society of Actuaries talked about the shifts earlier this month in Seattle, during a meeting of the National Association of Insurance Commissioners’ Health Actuarial Task Force.

LIMRA and the SOA Research Institute recently joined to start an Experience Studies Pro program. The program will conduct experience studies, or efforts to find out how insurance products really work.

Historically, the SOA used a variety of approaches when deciding whether to do experience studies. Managers of the new program will conduct feasibility surveys before starting studies, according to the draft meeting minutes and a slide deck included in a Health Actuarial Task Force meeting packet.

What It Means

Some of the same forces reshaping financial services companies, industry organizations and life and annuity product menus may also affect the sources of information used to develop and manage the products.

The New Study Strategy

MacDonald said an experience study feasibility survey will look both at sources of data for a study and sources of funding.

The program managers will move forward with a study if enough insurers seem interested in providing data and buying the study results.

Insurers’ Interests

MacDonald noted that regulators want studies about topics such as long-term care insurance claims and individual disability insurance claims, but that insurers are not as interested in those topics.

Most issuers of long-term care insurance have stopped writing new business and, for them, providing experience data is complicated, according to the presentation.

Similarly, in the individual disability insurance market, the number of issuers is small and compiling data is complicated.

MacDonald suggested that regulators could help by talking about their data priorities, encouraging insurers to participate in Experience Study Pro studies, and, possibly, having the NAIC help fund the studies.

Paul Lombardo, a Connecticut regulator who serves on the Health Actuarial Task Force, said he and a Michigan regulator on the task force would look for ways to help the SOA and long-term care insurance issuers continue to provide experience study data.