1. OESAI : LIFE INSURANCE TECHNICAL TRAINING
12-13 OCT 2016 – TRAVEL LODGE, GABORONE BOTSWANA
Presented by Ezekiel Macharia, Chief Actuary (KAFS)

2. Life Underwriting Challenges & Policyholder behaviour
OESAI COMPREHENSIVE LIFE INSURANCE TECHNICAL TRAINING
Ezekiel Macharia
Chief Actuary – Kenbright Actuarial & Financial Services
Day 2, Thursday 13th October, 2016

3. One insurance rate for All?
6.5 times lower on GDP per capita
One insurance rate for All?

4. AGENDA
Why Underwrite
Challenges
Policyholder behaviour
Conclusion

5. Why Underwrite

6. Why Underwrite: Risk Management
Rating terms are based on averages
Clients may deviate from this average
Underwriting allows for the insurer a leeway to assess clients compared to the average

7. Why Underwrite: Sales Process
Limited opportunity to rate appropriately
Less questions means more sales
Less questions means more risk & uncertainty
Technology may solve this
BUY INSURANCE

8. Making a Life Insurance Sale
Before underwriting (High Sum Assured)
Ten people want to buy a life insurance policy with a sum assured of $100,000
Each requires a medical report as per the underwriting guidelines for the sum assured requested
Also required to fill in 10 page questionnaire

9. Making a Life Insurance Sale
Five people give up!!
Three people are ok
One requires premium to be adjusted with exclusions
One is rejected
After underwriting (High Sum Assured)
Load OK OK OK
Decline

10. Why Underwrite: Moral Hazard
When the client knows more than you. They knowledgeably get a great deal at insurer’s expense.
Individual level
For example, terminally ill person buying a death benefit.
Does a very health person buying a pension translate to moral hazard?

11. Why Underwrite: Anti-Selection
Attracting the wrong demography.
For example, getting more smokers than you expected in your assumptions.
At group level

12. Challenges & Mitigation
Increasing Rating Factors Vs Sales
Age
Gender
Smoker/Non-smoker
Location
Morbidity Factors
Written Disclosures & Individual test

13. Actionable Steps in Underwriting
Accept (no changes)
Accept (with premium change)
Accept (with benefit reduction)
Reject

14. Actionable Steps at Claim Stage
Check for fraud
AML
Underwrite on claim
Exclusions/Moratorium
Enhance underwriting process from claims

15. Challenges in Africa Pricing Others Fraud Internal Data
At underwriting & claims stage
Internal Data
Insurers & Intermediary data not collated
Trust in Insurance
You don’t get anything back especially protection plans
Secondary Data
Limited comparison data
Underwriting
Limited data collected for underwriting
Confusion with Banks
Comparing sum assured and bank savings
Margins
Loading the price to accommodate for uncertainty
High Distribution Costs
Can be as high as 50% of premium

16. Underwriting Cycle
Soft premium rates in group business
Retail business but may bring stability in long run

17. Policyholder Behaviour
Policyholder behaviour changes with age

18. Botswana Population by Generations
Policyholder behaviour changes with age
African population is younger than the global propulation
Maturist
Baby Boomers
Gen X
Gen Y
Gen Z

19. Botswana Population by Generations
Gen Z
Gen Y
Gen X
Baby Boomers
Maturist
Insurance is an old concept
Are we using the wrong tools?

20. Conclusion We underwriting to mitigate the risk of uncertainty
Actionable steps can be taken in underwriting and at the claim stage
Data is critical for pricing
Underwriting cycle significantly affects group business
Policy behaviour should be viewed from a generation perspective

21. ?
QUESTIONS

22. Actuarial & Financial Services
Kenbright – established in 1993