Press Release
Finance & Investments | December 2007
The effects of technology on the life industry
The advances in technology, in terms of the early detection and treatment of chronic and terminal illnesses have had a great impact on the life insurance industry of late. However, due to the complexity in the living benefits sector the impact of technological advancement has influenced the industry in varying ways.
Life business has benefited the greatest from these technological advances, due to the increase in longevity of policy holders. Early detection means that individuals now have a better chance of receiving treatment that can often slow down or cure the progression of a life threatening condition. The subsequent decrease in mortality rates within the insured population has meant that claim payouts occur with a greater lapse in time from the inception of the policy to the payout date, although some of this expected improvement in longevity is already priced in by re-insurers. This vital issue is a driving force in RGA’s involvement with the Longer Life Foundation.
However, as these advances also mean that certain terminal illnesses are now treatable as chronic diseases, and previously debilitating conditions can often be cured or more effectively treated, the definitions and terms of critical illness (CI) payouts need to be addressed. Early strokes and myocardial infarctions (MI), aggressively treated with reperfusion medications or techniques improve the chances of having fully recovered stroke patients, or of having what has become known as an ‘aborted’ MI, with no permanent cardiac muscle impairment.
One approach to solving this issue would be to ensure that living benefits really only be paid to people who have, through the contraction and diagnosis of a critical illness, lost their ability to earn an income, cover over-run medical bills, pay for advanced medical treatment, adjust their lifestyles and/or manage their loss of insurability. This basically means that CI policies should only pay out in terms of the expected effects or consequences of an event, not on the diagnosis of the event alone.
Compounding the issue facing the industry is the fact that many products today remain driven partly by competitive market trends in the form of differentiation and not so much by client needs or affordability. With the rise of consumerism and the resulting competitive nature of the industry insurers have had to begin differentiating themselves in terms of the number of events covered. However, these products are not easily comparable, as the degree of severity of certain conditions required for a payout is often not taken into consideration.
In order to address this issue the industry may need to ensure that event definitions and the contract terms with regard to payouts are clearly and carefully thought out, paying on the subsequent expected effects or consequences of an event and not on the diagnosis, per se. This will ensure that the impact of improved technology on, for example the CI market, will be low, especially considering the current rate of advancement in terms of diagnosis and treatment. It will also future-proof policies, as there will always remain a need and place for CI cover, regardless of how advanced the treatment and diagnosis of diseases becomes.
Ends (Words: 516)
Distributed by:Pedro van Gaalen
RedCube Agency
Email: pedro@redcube.co.za
Tel: 011 996 2000
RGA Reinsurance Company of South Africa
