Against a background of continuing disruption due to the pandemic and uncertainty in the financial markets, our customers have a lot to think about – right across the enterprise.
We know this because Gen Re executives spend a lot of time working with clients to help them stay ahead in an ever-changing insurance environment. Our sponsored client events, along with industry-related meetings and one-on-one conversations are a rich source of feedback on what issues are top of mind in the industry.
Personnel – Focus on Staff, Remote Work, Agent Recruitment and Succession Planning
Acquiring, training, and retaining employees, as well as developing appropriate succession plans stand out as an enduring challenge. The impact of managing a remote work environment and preventing employee burnout post-lockdown is another often mentioned human resource issue.
The majority of companies support some type of remote work environment. The typical option mentioned is a hybrid arrangement, with part of the week spent in the office and part working from home for most departments.
On the sales side, an aging distribution profile is prompting carriers to question where sales growth will come from in the future. Agent recruitment increased during the pandemic, but some carriers have expressed concern that agents recruited during this time may not be retained longer term.
Companies generally feel that hiring and retention of employees continues to be a significant challenge.
Post‑COVID – UW, Digital Adoption, Mortality/Morbidity
Not surprisingly, the lockdown created multiple changes for the insurance industry. One striking example was the inability to obtain fluids for assessing the mortality risk of applicants. In response, companies introduced or made enhancements to their Accelerated Underwriting (AU) programs at a rapid pace.
As well as having the positive effect of accelerating digital adoption, the pandemic also stimulated distribution growth as more appointments were made through web conference instead of time consuming, face-to-face appointments. (A counterpoint to this trend was that institutional sales suffered since many of those appointments are conducted face‑to‑face.)
Asked whether they anticipated modifying future mortality/morbidity assumptions, companies said they are watching the longer-term mortality impact to see if the increased death rate continues. Most believe there is no long-term impact to morbidity.
On underwriting guidelines, companies said it is important to monitor and understand what the move towards AU will have on mortality results into the future. In addition, carriers will continue to monitor persistency to see if the increase in Life insurance demand will result in customers wanting to keep their policies long term.
Product and Valuation Changes
Global solvency modernization initiatives have affected reserve requirements for Life and Health insurers around the world. U.S. companies are adapting to changes to both statutory and GAAP reserves: ASU 2018‑12 applies new long-duration targeted improvement (LDTI) GAAP reserves to all long-duration Life, Annuity, and Health products that are in force on January 1, 2023. Recently, companies have updated products for 2017 CSO, Nonforfeiture, and 7702 rate changes.
Our clients have put together substantial internal teams to work on these initiatives, sometimes causing worrying delays to other projects where compliance timelines were short.
The reserve changes have added more complexity to reporting compared to traditional FAS60 locked‑in assumptions. In addition, the new requirements for reserves have caused organizations to continually review changes.
AU Evolution Accelerates
While take-up varies across Gen Re’s client base, it’s clear that AU is becoming part of most companies’ overall underwriting philosophy. AU underwriting tools are evolving rapidly, but with insufficient experience data, direct carriers and reinsurers find it challenging to price AU initiatives.
An overriding theme is that companies need help assessing the available data and tools to ensure they are staying current with the market. Companies also need to commit time to know their data and the new data or tools needed to integrate with legacy systems.
In terms of adoption, agents need to understand the AU process well so they can help communicate with the customer and set expectations on the process. Customers today expect immediate service, making streamlined, automated and accelerated underwriting processes critical. But customers also want the same financial value, and it is difficult to provide both.
From an actuarial point of view, the greatest concern with implementing AU workflow changes is the associated mortality slippage which needs to be monitored and managed. Upgrading technology and required processes, managing producers’ expectations, and improving analytical capabilities all need to be part of the solution. We hear that companies want to increase the percentage of accelerations, expand to broader ranges of issue ages and face amounts, reduce ”time to issue” as well as prevent tobacco and build misrepresentations, all without mortality slippage. That’s a tall order – and we can help.
Stay tuned for the upcoming summary report of Gen Re’s 2022 Accelerated Underwriting Survey, which will dive deeper into these mortality slippage concerns, with more than 50 participating companies.
With several upcoming industry meetings, such as the October SOA ImpAct meeting in Orlando, please reach out to your Gen Re marketing representative for a face-to-face meeting to see how we can help with your company’s concerns.