The 2004 Healthcare Conference April 2004, Scarman House, University of Warwick

A New World Of Protection? Ian Sissons and Peter Banthorpe Munich Re UK Life Branch

Contents  What is Protection?  What do we do at the moment?  What risks can the customer be encouraged to manage?  Delivering personal risk management  Where next?

What is protection?

What is Protection? Dictionary says: Protect 1. Keep safe (a person, thing etc); defend; guard….. Protection 1 a the act or an instance of protecting. b the state of being protected; defence. c a thing, person, or animal that provides protection. Source: The concise Oxford Dictionary. Ninth Edition.

Do current products protect? Life Assurance Critical Illness Insurance Income Protection Private Medical Cover Long-term Care Hospital Cash

What do we do at the moment?

A selection:  Bright Grey – free gym trial, discounted health screening, discounted health foods  BUPA – health screening  Axa – Denplan dental check-ups

What risks can customers be encouraged to manage?

The major causes of claim - CIC Source: Claims Submitted to CMIB 2000 CI Investigation – excludes death claims

The major causes of claim - IP Source: Wilkie Data. All years. Top 40 Causes of Claim. DP26.

The major causes of claim - PMI Source: MRe Specific Client Data

The major causes of claim - summary  Cancer  Heart Attack  Stroke  Musculoskeletal injuries  Psychological

How do we reduce the risk?  Exercise  Diet  Environment  Preventative Drug Treatments

Exercise  Numerous studies for classifying the benefits of moving from inactive to moderate to vigorous exercise  Studies concentrate on death from cause rather than incidence but can proxy  Direct benefits and also benefits on risk factors:  BMI  Blood pressure  Cholesterol levels  Reduced levels of stress

Relative Risk From Exercise For Various Diseases MenFemales IllnessModerateInactiveModerateInactive CHD Diabetes Prostate/Breast Cancer Lung Cancer Source: The case for active exercise insurance. Estelle V. Lambert et al.

Diet  Diet thought to account for 30% of cancers in Western Countries but proof of cause/effect is limited  Balanced diet of fruit, vegetables and cereals recommended  Effects on other risk factors:  Blood pressure  Lower cholesterol  Control Weight Source: The effect of diet on risk of cancer; Timothy Key et al; Lancet Volume 360; September

BMI and Disease Risk Source: Body Weight: implications for the prevention of coronary heart disease, stroke and diabetes mellitus in a cohort study of middle aged men; Shaper et al. BMJ 1997; 314:1311 BMI< Major coronary event Major Stroke Event Diabetes Adjusted Relative Risks for Various Diseases (14.8 year average follow up)

Drug Treatments and CHD  Aspirin: the perennial wonder drug!  For high risk over 50’s reduces chance of stroke and CHD by 20%  Costs c37p a month  Impact on quality of life/reduce fear of disease

Psychological/Musculoskeletal  Could be work or lifestyle related  Lifestyle underwriting excludes many  Work related difficult to address  Addressed through group insurances?  Psychological exclusions?

Delivering personal risk management

What does the insurance industry need?  Activities that are verifiable  Cost effective  Scientific proof/data on benefits  Attractive to the public  No side effects

What do people want?  Health improvements  Financial Incentives  Things people really want!  Cheap cinema tickets  Cheap travel  Cheap gym membership  Reward points(?)  Insurance Benefits  Reduced premiums  Greater benefits

Where does the value come from?  Explicit Charging  Does this work in a competitive environment?  Lower claims  Better quality of life at outset  Improving quality of life over term of policy  Better persistency  Cheaper costs of obtaining and running business  Non-Insurance Benefits cheaper due to commercial/affinity deals

Lower Claims  Better Quality of life at Outset  Verified by preferred/lifestyle underwriting factors?  What about other pools of risk?  Improving quality of life over term of policy  Verifiable?  Does this benefit annual policies?

How to structure the products  Need to encourage those lives which are improving (and discourage those that aren’t)  Age at entry rates  Competitive market  Annually Costed Long-term products  Less competitive market  More flexible in passing on discounts  Short-term products  Reserving implications?

Where next?