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Fall 2001
Group Life Committee Review
By Joe Malone
Munich American ReThe Group Life Committee presented five workshops and the "Let's Talk Shop" discussion group at the GUAA Annual Conference in Montreal. Here are some highlights of our workshops:
Critical Illness Insurance: An Update on Global Developments
We were pleased to have Janet Cassettari of SCOR VIE come from the United Kingdom and join Estes Barker of Canada Life Assurance Company to provide an update on Individual and Group Critical Illness Insurance. Critical Illness Insurance continues to evolve around the globe, but has yet to make a major splash in the United States.
In the UK, the Critical Illness market continues to grow steadily, and after 15 years over 10% of the UK working population is covered. Most of the UK policies that have been written are Individual policies that are targeted at mortgage buyers. The Group Market, with eight or nine active companies, is beginning to develop. The greatest potential in the Group sector is for a stand-alone Voluntary Critical Illness product.
In the UK, two types of Critical Illness Insurance are usually offered: Standard Coverage for 10 conditions, and Deluxe Coverage for as many as 30 conditions. In the British Group Market, some Free Cover (Guaranteed Issue) is available with a minimum level of participation, subject to a Pre Existing Conditions Exclusion. Janet noted that a key to marketing success is to have a simple, one-level lump sum benefit. It appears that partial payouts depending on the level of disability simply confuses the sales message.
Estes Barker shared with us Canada Life's progress two years after the introduction of their Group Critical Illness product in the United States. Estes began by explaining the difference between a Stand Alone CI product and an Accelerated CI product. Canada Life's CI product is an Accelerated product that is sold on a Voluntary Group Life Insurance chassis. An employee must purchase Voluntary Group Life coverage in order to be eligible to purchase Group Critical Illness coverage. Their product provides coverage for only eight conditions. Canada Life underwrites all applicants for Group Critical Illness coverage, taking Family History into consideration also. Canada Life does not offer any Guaranteed Issue coverage, although brokers are requesting it. Canada Life has enjoyed reasonable success in the United States in marketing this unique and progressive Group Insurance product.
Trends In Group Life Insurance Pricing
Karen Edgerton, Ed Martin and Tom Morgan of Lincoln Re discussed the use of some nontraditional demographic variables in Group Life Insurance pricing. The Group Life Insurance market is feeling increased pressure from decreasing margins, higher GI Limits, longer rate guarantees and aggressive credibility formulas. How can a company position itself for success and profitably differentiate itself? Lincoln Re recently completed a year long study of employed population mortality. The results of this study could provide a road map to the future of Group Life underwriting and pricing. Current manual rate pricing practices for Group Life Insurance focus on age, sex, industry and sometimes geographic area. Aggressive credibility factors have also been applied to historical Group Life claims experience. Lincoln Re's research concludes that while current pricing practices are a valid approach, the use of additional data factors can increase the accuracy of mortality estimates. Lincoln Re recommends that Group Underwriters also take income, education, occupation and marital status into consideration. This reinsurer also feels that full credibility for past claims experience is being given at significantly lower levels of exposure (15,000 Ð 25,000 life years) than is justified by statistical theory. Lincoln Re challenged the audience to think "outside of the box" and capture and utilize additional data.
International Exposure for Group Life Insurance
What can a Group Underwriter do when a client requests Group Insurance coverage for several employees who will be working temporarily, or permanently, in a foreign country? You need to think twice before you agree to cover them under the Group Insurance Policy for U.S. based employees. Al GaNun of CIGNA International, and Karl Hibbs of Hartford Life Group Reinsurance Plus provided their perspectives into this challenging area of employee benefits.
CIGNA has had a department dedicated to International Group business since 1976. International exposure can come from either a U.S. expatriate employee, a Third Country national employee or from a Foreign Local national employee. There are many general service issues (language, currency, and cultural), underwriting issues and special risks (political, legal, regulatory and licensing) that present a unique challenge to the International Group Underwriter. CIGNA International has multilingual service centers that are open 24 hours a day, 7 days a week, to administer this business.
Karl Hibbs explained how many U.S. Group Insurers are using Multinational Pooling to handle International exposure. A Multinational Pool is a global network of insurance providers and financial institutions that allow access to local benefit plans in foreign countries through a common facilitator. There are many advantages to using a Multinational Pool, both financial and competitive. Local carriers around the globe are more familiar with local benefits, laws and customs, and can provide competitive underwriting terms. A U.S. Group Insurer can access this global expertise without having to incur the cost and overhead of establishing a special department for this purpose.
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