Insurance premiums - are they right?

John Armstrong speaking at the insurance premiums pricing session

Five panelists discuss one of the thornier questions facing the insurance industry

In the first of two panel sessions addressing this topic, John Armstrong, Head of Actuarial at Allianz Partners, started by explaining that an oversupply of providers and a competitive, cost-focused marketplace has resulted in a downward pressure on premiums, and gave a list of possible drivers for medical inflation, which is significantly in excess of general inflation. At present, he explained, we are at the bottom of an underwriting cycle, with insurers providing comprehensive products with rich benefits. However, this may not be sustainable, and we will likely see a move to lighter benefits and higher premiums. 
Looking at key trends in global health insurance, John talked about how these are driving the way the industry will move over the next five years. Such trends include the increased blurring of local and global markets, stakeholders becoming more expert in using their data, increased regulation, investment in new technology, changes in population dynamics – including an ageing workforce, new delivery of care patterns, political and economic uncertainties, and wider medical innovations that are likely to lead to more cost pressures for providers. It’s difficult to see any of these trends not having inflationary impacts for the industry and therefore consumers, said John. It’s also not clear whether existing pricing models can accurately predict, beyond crude means, the impact of these trends. This will lead to significant challenges for underwriters, actuaries and, in general, planning. 
The questions for insurers, though, said John, is ‘what should our products be covering as we move forward?’. Insurers and providers need to work together, concluded John, to manage cost pressures, through aligning benefits to meet but not exceed needs, managing costs prior to treatment, managing individual treatment costs, and embracing technology to manage risk.

Will McAleer of World Travel Protection
Will McAleer of World Travel Protection

Will McAleer, President of World Travel Protection, followed with an insightful look at some of the pressures currently affecting premiums, beginning with a review of some recent high-cost remote evacuation cases carried out by his company, including a group from Everest. Travellers expect cover for such eventualities on standard policies, he said.
However, travellers are changing. We face an ageing population with multiple and complex medical conditions; an increase in the use of illicit drugs, promiscuous activity, and other risky behaviours such as cliff diving; and the instant response/threat of social media focusing on travellers’ plights – and we are living in an increasingly dangerous world. Other premium pressures highlighted by Will include the cost of regulatory intervention and reputational risks for large underwriters, climate change putting pressure on assistance companies to respond and also on insurers to deliver flight delay and cancellation cover, and technology demands. 
More people are buying insurance, said Will, as they are more aware that they need cover. Younger travellers need cover to meet their needs and enable them to do the things they want on their trip, so insurers need to make sure prices are right for all sectors of the market. Essentially, insurers need to deliver more value to customers, concluded Will – potentially pre- and post-travel, so they feel that buying travel insurance was worth it even if they didn’t need to make a claim.

In the second panel session looking at factors affecting premium pricing, attendees heard about the various insurer behaviours that affect pricing and learnt about methods of reducing costs through telemedicine and reclaimables. 
First up, revealing the good, the bad and the ugly when it comes to pricing influencers, Michael Tauber, CEO & Managing Director of International Rescue Services, began by sharing the good things he has witnessed in the Australian market and beyond, including technological advancements and the use of big data. Parametric insurance now sees the likes of cancellation and medical claims being paid globally in minutes and is revolutionising the marketplace. At the same time, insurers are making use of AI to enable chatbots to deal with claims and customer questions. Such methods of providing and servicing insurance require fewer resources in the back end and can increase an insurer’s net promoter score. 
Further innovations that fall into the ‘good’ category discussed by Michael include proactive pre-trip advice for travellers that is specific to their destination, policy customisation around limits and excess ranges, medical underwriting for pre-existing conditions, effective cost containment methods, and options around pricing; including lead time pricing and offering a range of excess options. 
On the other side of the coin, some of the not-so-good things Michael has noticed include schedule of benefits that obscure sub-limits, undisclosed depreciation allowances on covered items, cover declined for bookings not made on the ‘right’ type of credit card, and cancel for any reason cover, including time limit clauses. And the downright ugly, according to Michael, includes insurers refusing to cover mental health issues and other broad exclusions. In summary, said Michael, the best advice is to follow the words of Mark Twain and ‘Do the right thing. It will gratify some people and astonish the rest.’

Michael Tauber of International Rescue Services
Michael Tauber of International Rescue Services

Next, giving insights into how his company’s software can be integrated with that of any doctor in order to help bring down the cost of doctor visits for insurers, Pawel Sieczkiewicz. CEO of Telemedico, began by telling attendees about the Telemedico Medical Booth. This is a portable cabinet that can be installed in the workplace for employees to use instead of making a ‘stationary’ doctor visit, i.e. a visit to a doctor’s office. The booths are equipped with telemedical devices and software that allow live patient monitoring and connection to a doctor through a video monitor. 
Whether using your own doctors or Telemedico’s doctors, the company’s software is available in web format and in an app, allowing medical consultations from anywhere. The system also gives physicians recommendations, using its data, based on the symptoms provided by the patient, offering treatment advice or more information about the diagnosis. 
The benefits of the system include that the usage time of a doctor has been decreased by 22 per cent per consultation; the symptom checker makes it easier to find the right physician for each patient and can determine whether a stationary visit is necessary; and there is 88-per-cent accuracy via AI-based triage. With physical clinics offering their services between set hours and having potentially long wait times, the benefits of cheaper, faster, always-available telemedicine services are clearly beneficial for patients and insurers alike.

Pawel Sieczkiewicz of Telemedico
Pawel Sieczkiewicz of Telemedico

Concluding this session, Sabrina Chisholm, Director of Travel Salvage, gave an insightful presentation on how her company can recover costs for insurers related to holiday cancellations. With such claims making up 34 per cent of all travel claims and costing insurers £145 million per year in the UK alone, recovering costs in this area is something insurers should consider carefully if they don’t already. 
Refundable cost elements, explained Sabrina, include concealed taxes, fees and charges related to flights, accommodation and holiday bookings – such as airport departure tax and tourist taxes – though around £4 million per year remains unrecovered in the UK. Travel Salvage boasts a 50-per-cent successful recovery rate, amounting to an average of £83 per claim recovery for UK trip departures and 70 per cent and £50 respectively for international recoveries.
The recovery process necessitates exploiting travel and consumer regulations to increase recovery proceeds. To save any negative impact on the customer journey, Sabrina recommends settling a claim and then using the policyholder’s rights to recover cost elements on their behalf.

Sabrina Chisholm of Travel Salvage
Sabrina Chisholm of Travel Salvage