This is the third of a three-part series unpacking the key findings of RGA’s new report, “Aging in Asia: Inclusive Insurance Study on Seniors,” which explores the outlook for senior-focused insurance products across the region. For more information, view the full survey report and infographics here.
Traditionally, insurance products allowing higher entry ages or specifically targeting the senior market have employed uniform risk assessment practices, failing to differentiate between younger and older applicants. However, conventional underwriting methods and risk factors may not adequately capture the full risk profile of elderly individuals.
These standard approaches could overemphasize certain elements while underemphasizing others, resulting in an incomplete understanding of mortality and morbidity risks. Accurately assessing risks among senior applicants necessitates a unique approach that accounts for the intricate interplay between traditional and non-traditional risk factors inherent to this cohort.
This article is last in a three-part series exploring the results of RGA’s exclusive survey of over 1,600 consumers aged 55-80 across eight markets (China, Hong Kong, India, Japan, South Korea, Taiwan, Vietnam), This final instalment explores alternative risk assessment approaches for this valuable market.
Current risk assessment heavily emphasizes past medical histories, with only a few lifestyle indicators like build and smoking status typically evaluated. While these factors remain important, multiple clinical studies have shown they are not the sole determinants of morbidity and mortality risks among individuals aged 65 and above.
Research has identified cognitive ability, functional capacity, frailty levels, and social and mental health as independent predictors of subsequent mortality and morbidity in older age groups. Medical records may detail physical conditions, but they fall short in detailing how well a person is living right now, particularly seniors.
For example, frailty is one of the most important predictors of adverse outcomes in later life, including falls, functional decline, and hospitalization. “Frailty” is defined as a decline in multiple physiological systems, along with an increased vulnerability to stressors.1 Frail adults have a higher risk of death from all causes than non-frail adults. For example, in one study, the three-year death rate for frail patients was 28.6%, compared to 14.5% for non-frail patients.2
Similarly, social isolation and loneliness are associated with a higher risk of mortality in older adults. One meta-analysis found that social isolation and loneliness were associated with a 26% and 29% higher risk of mortality, respectively. This is comparable to the risk of smoking 15 cigarettes a day or having an alcohol use disorder. Social isolation and loneliness are also associated with a higher risk of dementia, stroke, coronary artery disease, depression, anxiety, and suicide.3
By understanding the significance of factors like frailty and social health and their impact, insurers can adopt a more holistic and targeted approach to underwriting and calculating future risks for senior applicants.
To accurately gauge risks among elderly applicants, it would benefit insurers to move beyond solely relying on medical diagnoses. Incorporating functional assessments that evaluate cognitive function, physical capabilities, frailty indicators, and psychosocial well-being can provide invaluable insights into an individual's overall health trajectory.
Such a multidimensional approach not only enhances risk stratification but also promotes inclusivity by considering the complete picture of an applicant's condition, rather than solely focusing on specific diagnoses that may unfairly exclude otherwise viable risks.
Traditional products often carry higher anticipated loss ratios for senior lives, so designing offerings specifically catered to the needs of the elderly allows for a more tailored approach. Markets with prior experience in senior products, such as Japan and South Korea, can provide valuable data insights.
- Align coverage levels with disease management costs pertinent to senior care needs.
- Maintain clear and strict policy definitions.
- Offer coverage as riders to annuities or savings plans to mitigate anti-selection risks.
- Leverage positive risk factors like higher education, occupation history, and net worth for channel segmentation.
- Balance inclusivity with managing anti-selection risks specific to senior lives.
- Cognitive assessments may be required for advanced age groups.
- Leverage existing market practices and loss ratio experience.
Along with cost and questions about the coverage needed, overly complicated underwriting is a key deterrent for seniors seeking insurance coverage across most markets.
Several strategies can simplify the onboarding process:
Ensuring absolute clarity in policy definitions is crucial for a smooth claims process tailored to seniors.
According to RGA’s senior survey, one of the top three drivers for seniors considering life insurance and CI insurance was "ease of making a claim."
Be mindful that definitions contingent on surgeries may face challenges due to complex medical histories or surgical risks. In such cases, thoroughly review medical records from treating physicians and seek guidance from experienced insurance medical experts to ensure fair adjudication.
Continuously integrate claims feedback into the product development cycle. Any difficulties encountered with definitions or evidence gathering can inform subsequent iterations, further enhancing the product's suitability for the intended customer base.
By rethinking traditional risk assessment methodologies and integrating comprehensive functional evaluations tailored to the unique characteristics of senior populations, insurers can unlock new opportunities within this rapidly expanding market segment while ensuring sustainable profitability through refined pricing and underwriting practices.
Discover opportunities from RGA's analysis of 1,636 respondents in China, Hong Kong, Japan, Taiwan, India, South Korea, Thailand, and Vietnam. Don't miss this comprehensive look at the rapidly evolving senior market in Asia: "Aging in Asia: Inclusive Insurance Study on Seniors."
1 Hoogendijk, E.O., Smit, A.P., van Dam, C., Schuster, N.A., de Breij, S., Holwerda, T.J., Huisman, M., Dent, E. and Andrew, M.K. (2020), Frailty Combined with Loneliness or Social Isolation: An Elevated Risk for Mortality in Later Life. J Am Geriatr Soc, 68: 2587-2593. https://doi.org/10.1111/jgs.16716
2 Hao, Q., Zhou, L., Dong, B. et al. The role of frailty in predicting mortality and readmission in older adults in acute care wards: a prospective study. Sci Rep 9, 1207 (2019). https://doi.org/10.1038/s41598-018-38072-7
3 Freedman A, Nicolle J. Social isolation and loneliness: the new geriatric giants: Approach for primary care. Can Fam Physician. 2020 Mar;66(3):176-182. PMID: 32165464; PMCID: PMC8302356
