Emerging Trends And Practices In Life Insurance Claims Management
Emerging trends and practices in LifeInsurance Claims Management9th October 20171
Today’s presentation Life insurance claims landscapeCase Law trends and life claims litigationRehabilitation and Return to WorkImprovements in claims management operations including use of AIClaims management, claims philosophy and the product lifecycleQ&AEmerging trends and practices in Life Insurance Claims Management2
The life insurance claims landscapeElizabeth BakerEmerging trends and practices in Life Insurance Claims Management3
Claims continue to have a significant financial impactNet profit after tax/Net policy revenue - quarterly return60%40%20%0%-20%-40%-60%-80%-100%Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017Individual lump sum riskIndividual disability income insuranceGroup lump sum riskGroup disability income insuranceSource: EY analysis of APRA Quarterly LI BulletinEmerging trends and practices in Life Insurance Claims Management4
there’s ongoing regulatory attention on life claims“Life insurance is a vital product for Australian consumers and their families, helpingthem to manage risk and providing support, often at times of significant financial stress.However, ASIC's regulatory work, as well as concerns raised more generally byconsumers, indicate that the life insurance sector has been falling short of thestandards that we would expect.”Peter Kell, Deputy Chairman, ASICSource: Parliamentary Joint Committee, Corporations & Financial Services 8 September 2017ASIC’s current work in the life insurance sector includes1. With APRA, jointly undertaking the development of a public reporting2.3.4.5.regime for life insurance claims outcomesDeeper dive into TPD ClaimsReview of the use of surveillance practices in claims management witha focus on general insurance but including a set of life insurancematters including surveillance in cases involving mental illness claimsA major review of the sale of direct life insuranceGroup insurance through Super including disclosure to members,complaints handling and incentivesEmerging trends and practices in Life Insurance Claims Management5
and continued media interest 7 March 201611 October 201612 October 20165 October 2017Emerging trends and practices in Life Insurance Claims Management6
Case law trends and life insuranceclaims litigationPresented by Darryl PereiraEmerging trends and practices in Life Insurance Claims Management7
Life insurance Litigation Trends1Interpretation of ETE clause in TPD definitions2Increased Anti-Discrimination complaintsEmerging trends and practices in Life Insurance Claims Management8
TPD litigationCommon TPD definition:(a) absent from work through illness or injury for six consecutive months; and(b) in the opinion of the insurer, the life insured has become incapacitated to suchan extent as to render the life insured unlikely ever to engage in or work for rewardin any occupation or work for which [he/she] is reasonably suited by reason ofeducation, training or experience.Job Availability vcapacityOccupationwith or withoutretrainingMeaning ofunlikely everEmerging trends and practices in Life Insurance Claims ManagementRelevance of postDOA subsequenteventsAlternativeoccupationsuited by ETE9
Hannover Life Re v Jones [2017] NSWCA 233KEY FACTS Claimant ETE: left schoolaged 16, school certificate,qualified as tradesman roofplumber, entire work historyin roofing industry Injured back – age 29 atrelevant date ofassessment Insurer denied TPD claim onbasis had capacity and ETEto work in non manual rolesINSURER DENIAL Jones had transferable employment skills - communication, administrative, computer andorganisational skills Vocational assessment identified four entry-level positions could perform with no retraining:1. Retail sales (hardware)2. Console operator3. Customer service advisor/telemarketer4. Courier/delivery driveEmerging trends and practices in Life Insurance Claims Management10
Hannover Life Re v Jones [2017] NSWCA 233PRIMARY JUDGE FINDINGS Insurer made an error in how it applied ETE clause. Alternative occupation must be one for which the insured has been prepared or shaped byhis or her past vocational history.“The purpose of the provision is to provide a benefit for those who are disabled from thefollowing for which their past education, training or experience has prepared them – not anyoccupation which may be conceived, however far removed from his or her vocational history,which can be performed without further education, training or experience.” The alternative occupations involved customer contact and service. Vocational history revealed no experience in or aptitude for customer service. Mr Jones met the definition of TPD as he was only qualified for manual work and could nolonger perform that work.Emerging trends and practices in Life Insurance Claims Management11
Hannover Life Re v Jones [2017] NSWCA 233COURT OF APPEAL’S FINDINGS Primary Judge’s construction of the ETE clause was correct. ETE clause requires insurer to examine occupations for which the claimant’s ETE hasprepared him that naturally is shaped by his vocational history. There is no error in thatapproach. No error in finding that Mr Jones’ level of schooling and entire work history meant workqualified for by ETE was limited to manual labour. Entry Level Jobs - Mr Jones’ vocational history revealed no experience or aptitude forcustomer service.Does Jones reflect product intent and pricing?Emerging trends and practices in Life Insurance Claims Management12
Anti-Discrimination ComplaintsIncreased antidiscriminationcomplaintsIncreasedawareness ofneed for dataIncreasedwillingness tochallenge dataChangingsocietalexpectationsEmerging trends and practices in Life Insurance Claims Management13
Insurance ExemptionDiscrimination in insurance not unlawful where:Limb 1.Limb 2.the discrimination is based upon actuarial or statistical dataon which it is reasonable to rely AND the discrimination isreasonable having regard to the data and any otherrelevant factors (the data limb); orin a case where no such data is available and cannotreasonably be obtained – the discrimination is reasonablehaving regard to any other relevant factors (the no datalimb).Emerging trends and practices in Life Insurance Claims Management14
Reasonable dataIngram v QBE Insurance [2015] “Where QBE has not produced evidence toestablish that the statistical data relied uponwas in existence when the terms of thepolicy were formulated or that any personinvolved in the drafting or approval of thepolicy wording had any knowledge of orregard to those statistics, there is insufficientevidence available on which I could safelydraw the inference sought.” “I accept Ms Ingram’s submission that Iought not to accept the assumption that aperson who falls within the disability statuscategories of the ABS survey summary andso is unable to undertake core activitieswould be unable to travel.”FOS Case 428120 March 2017 Studies not “accompanied by anyevidence, as required by the DD Act, thatthe FSP actually relied on the data andstudies in introducing and maintaining theexclusion” “Overall the data referred to by the [insurer]is mostly about the prevalence, diagnosisand treatment of mental illness, not data,required by the DD Act, about theassessment of the insurance risk or incidencedata.”Emerging trends and practices in Life Insurance Claims Management15
The importance of Rehabilitation and RTWClaims experience, metrics andcustomer outcomesPresented by Carly Van Den Akker, Swiss Re Life & HealthEmerging trends and practices in Life Insurance Claims Management16
The key ingredients Policy provisions for rehabilitationRehabilitation treatmentOpportunity to intervene earlyA motivated customerA supportive employerA customised programEmerging trends and practices in Life Insurance Claims Management75FTE Rehab Consultantsworking in-houseacross life re/insurers17
Time is preciousRehab Watch20142016ΔFrom DON387 days197 days190 daysFrom DOD522 days459 days63 daysSource: Swiss Re Rehabilitation Watch 2014 and 2106Wait period(average time)Days absent from workSource: Realising the Health Benefits of Work, AFOEM Position statement (research byGuthrie, 2007)Emerging trends and practices in Life Insurance Claims Management18
More customers are participatingSourceEmerging trends and practices in Life Insurance Claims Management19
One size does NOT fit all!Medical and BPS modelsPhysicalsymptomsSourceSupport systemsSocietal beliefsEmerging trends and practices in Life Insurance Claims ManagementThoughts/beliefsFeelingsBehaviour20
Measurement methodologiesSourceEmerging trends and practices in Life Insurance Claims Management21
Industry outcomesROIRTWEmerging trends and practices in Life Insurance Claims Management 25.1822
The future for life rehabilitationEmerging trends and practices in Life Insurance Claims Management23
Good work is good for all!Realising the Health Benefits of ‘Good’ Workpresents compelling international and Australasianevidence that ‘good’ work is generally good for healthand wellbeing, and that long term work absence,work disability and unemployment generally have anegative impact on health and wellbeing.Emerging trends and practices in Life Insurance Claims Management24
Improvements in life insurance claimsmanagement operations including the use of AIPresented by Derek VineEmerging trends and practices in Life Insurance Claims Management25
There has been a lot of excitementand some would even say hypearound AI, but what is AI?Emerging trends and practices in Life Insurance Claims Management26
It is not .Emerging trends and practices in Life Insurance Claims Management27
But it is a .Emerging trends and practices in Life Insurance Claims Management28
Integrating AI into AIA claims assessmentClaimsdata entry(setup)ClaimseligibilityMedical &financialassessmentDecisionFulfilmentPolicy reviewMember timeline constructionData & document reviewInitial eligibility assessmentActive employment assessment(Payslip consolidation)PDI calculationsAssessment notesPeer &/or senior reviewEmerging trends and practices in Life Insurance Claims Management29
‘When correct data isprovided, IBM Watson has99% accuracy of results’AI accuracy in theclaims processBenefitsSuccessful match 81%Source data error 9%Incomplete information 9%Rule failure 1%ReductionEfficiency on steps – Simple claims49%Efficiency on steps – Complex claims77%Average duration of assessments48%Average duration of peer review17%Emerging trends and practices in Life Insurance Claims Management30
Positive feedback - AI pilotQuality of Watson assessmentsHigher accuracy with fully evidenced reasoning prompting AIAassessors to re-check assessments if they disagree with Watson.Reduction in re-work and reviewReduction in reviews conducted by peers and seniors arecontributing to shortened cycle times.Faster identification of missing dataWatson identifies incomplete source data leading to fasteridentification of claims that need additional investigation up front.Ease of useWatson’s output is fully integrated into existing AIA applications.Transition to trustPositive change in mindset for AIA assessors, from ‘fear of themachines’, to enjoying AI support as part of their process andgiving them more quality contact time with our claimants.Staff engagementStaff are raising ideas for further use of Watson, they are embracingit as an integrated part of the claims process.Emerging trends and practices in Life Insurance Claims Management31
Effectively reflecting claims management andclaims philosophy in the product lifecyclePresented by Elizabeth BakerEmerging trends and practices in Life Insurance Claims Management32
The life insurance product life cycleTo have a sustainable, financially sound life insurance product that is within a company’s RiskAppetite, a clear and continuous link between sales and distribution, underwriting, productdesign, and pricing and claims management is required.Sales anddistributionClaimsmanagementEmerging trends and practices in Life Insurance Claims ManagementUnderwritingProduct designand premium rating33
Is the claims philosophy been appropriatelyallowed for in the pricing and product design?An insurer’s claims philosophy captures theinsurer’s current approach to claims assessment,administration and settlement.This would include its expectations of claimants (e.g. inrespect of the burden of proof of disability), the nature ofsupport given to claimants, processes to be followed bythe claimant and communication with the claimant. APRAexpects the insurer’s claims philosophy to be clearlyarticulated. In particular, it is important that an RSE licenseebe able to understand the insurer’s practical application ofthe definition of disablementClaims philosophy encompasses those claimsmanagement processes and controls of the insurer thatsupport the insurer paying all valid claims in a timelymanner.- Prudential practice guide, LPG 270; APRAEmerging trends and practices in Life Insurance Claims Management34
Some example life insurance claims philosophiesWe pay legitimate claims whenthey’re rightfully due and to treatall policy owners with respect,while acting in a professionalmanner at all timesput clients first anddo what’s right forthem every time: welook for ways to payclaims .We're committed to claims and tomaking a real difference to your life ata difficult time.Assess all claims promptly and fairly and totreat all customers with empathy andunderstanding.Pay all genuineclaims as soon aspossible once all thenecessarydocumentation hasbeen received andassessedOur business is aboutbeing there for ourcustomers when theyneed us most. So weaim to pay everylegitimate claim wereceive, quickly andwith compassion andcare.Act in good faith at all times and be open andtransparent throughout the claims processOur service is fair, ethical and transparent to plan ownersand/or intermediaries and their clients.Our philosophy is simple – helping peoplewhen they need it most. Our team adoptsa professional and positive approachtowards assessments, and we look forways to pay a claim promptly, not avoid it.We operate with transparency andempathy.Claim time is our moment of truth. We see it as deliveringon a promise that we made to you - a promise to protectyou and your family financially.We promise to make our claims process as easy aspossible for you so you can concentrate on being withyour loved ones.Our claims philosophy is based on the assumption that allclaims are lodged for genuine reasons, and that our role is tolook for ways to pay claims, not for ways to deny them. Weaim to assess claims; promptly, fairly, consistently,transparently and sensitivelyEmerging trends and practices in Life Insurance Claims Management35
What’s inside your summary claims experience data?Claims experience data as a basis for Valuation assumptionsPricing assumptionsWhat are the definitions?What’s a notified claim, a declined claim, a withdrawnclaim? What are the circumstances of these claims? E.g. for declined claims, is it the first decline or theultimate decision which might be admitted? Whatabout not on the risk?Currently no standardized definitions although theAPRA/ASIC data collection exercise is developing these Emerging trends and practices in Life Insurance Claims Management36
What’s inside your summary claims data?Individual claim file reviews can provide insightsWhat is the profile of the claimants By Channel ( Retail, Group, Direct)By main benefit type (Death, TI, TPD, Trauma, IP)Consistency with profile of inforce business?What types of claims? Any cohorts overrepresented (age, occupation, selfemployed, sum insured band, location etc.)Are certain claim types overrepresented (sportingaccidents, certain causes of claim)?What about comorbidity with mental health conditionsas a secondary not primary condition in IP?What type of trauma claims are evident?Are there themes or other correlations evident ?Emerging trends and practices in Life Insurance Claims Management37
Can underwriting & product design be improved?Individual claim file review results are usefulWhat are the impacts for underwriting? Are there themes or other correlations evident in claims that may requireunderwriting question and/or process redesign?Is the financial underwriting process adequate?What are the impacts for product design and pricing? Do product features work as expected? e.g. Ancillary benefits – are they reallylow cost?If product exclusions, do they reflect claims that a reasonable person would notexpect to be covered?Are the eligibility rules/At work tests for Group insurance reasonable?Is the product wording clear enough?Should the repricing strategy be more targeted?Emerging trends and practices in Life Insurance Claims Management38
Claims dispute data and ex-gratia claiminformation is also helpfulWhat is the profile of claims disputes? Focus on non-service related claims disputesAre there any themes? Are there any trends?Claims decisions – do they relate to definitions? Do they relate to exclusions?Product features – Do particular features appear to be not well understoodby consumers?Are there ex-gratia claims and complex claims? What are the types of ex-gratia and complex claims?Are there any themes? Are there any trends?Does the product wording need to be amended?Does the pricing or product design need to be altered?Emerging trends and practices in Life Insurance Claims Management39
Incorporating claims management insights isessential to the life product lifecycle1.2.3.4.Continuous Link betweenSales & distributionUnderwritingProduct design and pricingClaims managementLook within theclaims experiencewith individualclaim file reviewsEmerging trends and practices in Life Insurance Claims ManagementAllow for the claimsphilosophy andreflect any changesover timeChange is constant!Incorporate trends legal, RTW, BPS, AI,disputes, ex gratia,regulation etc.40
Q&AEmerging trends and practices in Life Insurance Claims Management41
Do you have questions? - Contact usLiz BakerCarly Van Den AkkerEYDirector AdvisorySwiss Re Life & HealthAustraliaClaims RehabilitationManager 61 2 8295 9588 61 499 006 100Elizabeth.baker@au.ey.comCarly VanDenAkker@swissre.comDarryl PereiraDerek VineTurksLegalPartnerAIAHead of Operations - Group 61 418 223 798 61 478 477 .au42
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Emerging trends and practices in Life Insurance Claims Management 1. With APRA, jointly undertaking the development of a public reporting regime for life insurance claims outcomes 2. Deeper dive into TPD Claims 3. Review of the use of surveillance practices in claims management with a focus on general insurance but including a set of life insurance
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