In our previous paper, “A Changing World – Environmental Factors,” the perception was put forth that several pressures have been increasing on the ability of life insurers worldwide to investigate and validate claims. To investigate whether this perception was in line with reality, RGA surveyed its claims managers about their thoughts and experiences, and their current and developing challenges.
We hoped gathering this information would help clarify whether these challenges represent global trends or are short-term responses to market conditions. As RGA has offices in 26 countries and does business in more than 70 countries worldwide, we were confident of a truly global assessment.
Our survey identified two sets of pressures:
- External pressures, over which insurers have little control
- Internal pressures, over which insurers have some control
In our previous paper, we discussed the external environment factors and pressures identified that are affecting claims assessors in today’s fast-changing worldwide market. In this one, we look at internal pressures and how they are affecting claims practices.
Survey respondents identified these three internal pressures as the most important:
- Products: Increasing complexity and shrinking lifecycles
- Resources: The ability to attract and retain good claims assessors, and the ramifications of outsourcing key claims tasks to third-party administrators (TPAs)
- Technology: The need to incorporate it to improve claims processes
- Increasing complexity
- Policy lifecycles
- Simplified underwriting
Outlook: Mature and developing markets will experience divergent trends: mature markets anticipate a drive to simplification while developing markets expect further complexity.
The most striking example of an insurance product experiencing increasing complexity is that of critical Illness. When introduced in 1983, CI covered just four conditions: heart attack, stroke, cancer, and coronary artery disease requiring surgery.
In the first paper, we discussed how medical advances were changing claims incidence and the industry’s need to respond to maintain a viable product. Other factors also influenced CI’s evolution: its popularity, especially in Asia; insurers’ need to differentiate products competitively; and the desire to enhance coverage as broadly as possible.
Today’s CI products provide far more. In some markets, there are CI products that cover more than 100 medical conditions. There are also CI products that provide partial payments for less serious or earlier stages of an illness, and products that have multi-pay options permitting benefit payouts for up to seven claims.
This rapidly changing market environment and its resulting competitive pressures are yielding fast-shrinking product lifecycles as companies compete to offer better, more extensive and more up-to-date coverage.
With product designers and marketing teams driving to differentiate their products from competitors and from their own previous iterations, it is easy to see how product complexity develops. And these issues are not exclusive to critical illness. Examples can easily be provided for health, disability income, and permanent disability as well.
An interesting divergence in the outlook for product development is emerging between developing and mature markets. Consumers in mature markets are demanding clarity, which claims managers believe will drive products to become simpler over the next decade. Emerging and developing markets, however, have strong competitive pressures and the outlook is for product complexity to continue to increase as insurers try to differentiate offerings by adding more features and benefits.
Product complexity can have two main challenges for claims assessors and insureds:
- A product can be so complex that insureds might not know when to make a valid claim or even what might constitute a valid claim, which could delay claim filing and bring additional challenges in obtaining evidence and verification.
- Claims assessors might also have difficulty knowing and identifying all benefits for which a covered individual is eligible, which could result in elevated decline rates.
The concurrent push to simplify underwriting has its positives and negatives as well. Underwriting and claims processes should both be in balance and complementary, but a principal issue for simplified and guaranteed issue products, which are available in most markets, is that simplification has reduced the number and scope of underwriting questions. This is increasingly requiring that claims assessors investigate pre-existing conditions at claim time – a recipe that is likely to yield unhappy claimants and bad publicity. A forensic claims process might also be unrealistic if contestable periods continue to shorten or if other regulations further restrict the ability of claims assessors to look at historical illness.Read More +