Life Underwriting Challenges and Policyholder Behaviour 22 April 2016 André Basson Central Actuarial Services Hollard Group Organisation of Southern and East Africa Insurers Technical Training Seminar

Agenda Mobile revolution Death of an underwriter Present competitive environment Society demographical changes Behaviour engineering Policyholder behaviour

Mobile revolution Mobile technology and traditional distribution model – Photos / scanned documents – Fingerprint copy – Live voice recordings New technology is changing how consumers and companies interact with insurers – s – Instant messaging – Social media Internet and mobile devices are impacting distribution, but overall share of e-commerce sales are still low – Attract higher income classes, limited market share…for now

Mobile revolution (cont.) New technologies will eventually enable customers to arrange most of their insurance through remote digital channels – No human interaction necessary – Lower staff costs vs higher development cost Traditional distribution channels continue to dominate but the future is technology Developed markets are utilising technology more The penetration rate of mobile devices into Africa is exceeding the rest of the world Micro insurance being sold through mobile devices – Tanzania – Ghana – Kenya – South Africa Innovation WILL continue

What is Micro insurance? Products that are less complicated that traditional insurance products This targets the section of the population that does not normally consider insurance (lower income classes) This trend has spread to other territories – Latin America – Asia

Death of an underwriter Life insurers require medical examinations and tests when issuing new contracts but this takes time – weeks/months Underwriting evidence protects the insurer against sub-standard risks but is seen as deterrent to uneducated lower/middle income classes Advances in technologies, mobile devices and data driven predictive modelling offers solutions to bridge information gap The reduces the length of accepting and issuing an insurance contract

Death of an underwriter (cont.) Big data and analytical techniques are simplifying the process These advances reduces the market for traditionally underwritten products There are – Compliance and privacy issues – Complexity of products and relevance of the underwriting requirements – Disclosure not in person – Simplified language so that anyone can understand insurance “lingo”

Present competitive environment Underwriting – is it an advantage? If customers make decisions only based on price, how do innovate and change the value proposition? Because underwriting is expensive how much value does it add to the premium sweet-spot? Partnerships with health clubs and/or laboratories External parties entering traditional life insurer space and causing major disruptions – Medical aid schemes (behavioural analytics, medical history)

Society demographical changes Continued mortality improvement – HIV management – Medical advances – Access to health care Customer expectations Increased focus on health habits – Exercise – Healthy eating – Customer education

Behavioural engineering Can insurers induce favourable behaviour patter from insured population? Products with return of premiums – Cost – Longevity Discounts to healthy lifestyle individuals – Regular health checks (technology) Separation of long term and short term behavioural elements

Policyholder behaviour Lapsing of policies – selective – Anti-lapse strategy – Commission structures – Training – Education Product design – Flexibility (increase/decrease covers) – Premium holidays (11/12) – Premium waivers (jobloss, retirement etc.) – Terms and conditions (grace periods) For investment type products – Surrender risk – Policy loan – Partial withdrawal

Questions? Thank You