Trends in Life Insurance 2022: How the Industry Has Changed

Link: https://www.soa.org/sections/reinsurance/reinsurance-newsletter/2022/april/rsn-2022-04-gambhir/

Graphic:

Excerpt:

Growing popularity in no-medical-exam life insurance products has had one expected outcome: More life insurance policies with accelerated underwriting options available in the marketplace. For example, Policygenius offered just three accelerated underwriting options in 2020. In 2021, that number more than doubled to seven, and more options will likely be available in 2022.

Additionally, while such policies had historically only been available to applicants who were young and in good health, the competitive market has prompted more widespread availability. Now, applicants across all health classes can get no-medical-exam policies.

While no-medical-exam policies tend to be about the same cost as fully underwritten policies, applicants tend to favor them even when they are more expensive due to the convenience and expedited turnaround time.

Author(s): Nupur Gambhir

Publication Date: April 2022

Publication Site: Reinsurance News, SOA

Warning: Tossing Russian Banks From the International System Could Backfire

Link: https://www.ai-cio.com/news/warning-tossing-russian-banks-from-the-international-system-could-backfire/

Excerpt:

The decision to boot Russian lenders from the global bank messaging system as punishment for its invasion of Ukraine is a very bad idea that could boomerang and hurt the West, Credit Suisse admonishes.

“Exclusions from SWIFT will lead to missed payments and giant overdrafts similar to the missed payments and giant overdrafts that we saw in March 2020,” wrote Credit Suisse strategist Zoltan Pozsar, in a research note.

….

“Exclusions from SWIFT will lead to missed payments everywhere,” Pozsar wrote. Two years ago, “the virus froze the flow of goods and services that led to missed payments.” Aside from the financial panic at the outset of the pandemic, the world ran into a similar problem in 2008, when Lehman Brothers collapsed, he said. 

 Pozsar wrote: “Banks’ inability to make payments due to their exclusion from SWIFT is the same as Lehman’s inability to make payments due to its clearing bank’s unwillingness to send payments on its behalf. History does not repeat itself, but it rhymes.”

Author(s): Larry Light

Publication Date: 28 Feb 2022

Publication Site: ai-CIO

Ten Most Dangerous Risks for Insurers

Link: https://mcusercontent.com/991483cca1a8e7eb050cff8bd/files/7dfc14f1-eaa5-5658-64a3-54f5c5e1955f/1Q2022_SRSE_Dangerous_Risks.pdf

Excerpt:

This year we had record participation with
over 250 insurance professionals taking part.
This is the fifth iteration of this poll and 2022
shows some consistency along with some very
new risks. Inflation, Employee retention and
Ability to hire new employees are three new
risks to the top of this poll, but they should
not be surprises.

….

2. INFLATION
Up very sharply – Previously #52
Prices are rising faster than they have since the
1980s in most of the developed world. Insurers
will be hit with a double whammy as the real
value of invested assets decays and the cost of
doing business and claims costs increases at the
same time.

EMPLOYEE RETENTION
Not on the list previously
The Great Resignation makes the headlines.
COVID seems to have accelerated the timeline
for the inevitable wave of Boomer retirements.
Also concerning are the numbers leaving due to
health care burnout and caregiver
responsibilities. The problem for insurers is
figuring out how to respond to the massive loss
of experience.

Author(s): Actuarial Risk Management

Publication Date: Accessed 8 Mar 2022

Insurance Companies – Heels or Heroes?

Link:https://www.rstreet.org/2022/01/24/insurance-companies-heels-or-heroes/

Excerpt:

The insurance industry is far from the economy’s most-admired sector. A Forbes survey found insurance ranking low in popularity in the public eye. Three main reasons are responsible for insurers’ relatively poor rating. First is the intangible nature of the insurance product. Unlike a car one can drive home from the dealership, or a chocolate bar whose taste can be savored, purchase of an insurance policy does not lead to immediate physical gratification. To be sure, if there is no loss, one may never get a flavor of its value. Second, insurance is associated with life’s tragedies, its most physically, emotionally and financially distressing experiences—a home damaged by a storm, a car totaled, being sued, a death or dread disease, or a crippling workplace accident. Insurance payments can take away the sting with financial recovery, but loss remains painful, especially if one discovers the loss is not 100 percent covered. And third, the insurance industry has become an easy target for critics who regularly vilify it.

…..

Why do we maintain that insurance, R Street’s inaugural research program, is fundamentally exciting? Three reasons.

First, insurance is the economy’s financial first responder. When the wind blows, the earth shakes and large-class action lawsuits are decided in plaintiffs’ favor, the insurance industry pays. 

….

Second, insurers are significant investors in the capital markets. They provide much of the financial muscle to power the economy. Property-casualty insurers hold $1.1 trillion in bonds, and life and health insurers hold another $3.6 trillion. Collectively, insurers hold $4.7 trillion in bonds, 10 percent of the U.S. bond market of $47 trillion.

….

Third, insurance is the grease in the engine of the economy. Without clinical trials insurance, pharmaceutical companies would not take the risk of developing vaccines. Without ocean marine or inland marine insurance, ships would not sail and trucks would not take the risk to carry loads. Airplanes would not fly, people would be afraid to drive, and inventors would not create new products for fear of lawsuits. 

Author(s): Jerry Theodorou

Publication Date: 22 Jan 2022

Publication Site: R Street

New reinsurer “Martello Re” launches with backing of MassMutual, Centerbridge Partners and Brown Brothers Harriman

Link:https://www.massmutual.com/about-us/news-and-press-releases/press-releases/2022/01/new-reinsurer-martello-re-launches-with-backing-of-massmutual-centerbridge-partners-and-brown-brothers-harriman

Excerpt:

Martello Re Limited (“Martello Re”), a licensed Class E Bermuda-based life and annuity reinsurance company with initial equity of $1.65 billion, has been launched with the financial support of Massachusetts Mutual Life Insurance Company (“MassMutual”), Centerbridge Partners, Brown Brothers Harriman, and a pre-eminent group of institutional investors and family offices, including Hudson Structured Capital Management Ltd. (doing its re/insurance business as HSCM Bermuda). Barings and Centerbridge will act as asset managers for Martello Re.

Through a commitment to long-term financial strength, creative solutions, and unique investment capabilities, Martello Re plans to offer a differentiated value proposition to its counterparties. The company will initially focus on providing MassMutual and its subsidiaries with reinsurance capacity on current product offerings, after which it will offer its services selectively to other top insurers in the life and annuity space.

MassMutual and its subsidiaries will initially reinsure approximately $14 billion of general account liabilities to Martello Re and also enter into a flow arrangement to reinsure new business. Both transactions are expected to close in February 2022 and have received regulatory approval.

Publication Date: 12 Jan 2022

Publication Site: MassMutual

To Fight Covid, We Need to Think Less Like Doctors

Link: https://www.nytimes.com/2022/01/14/opinion/covid-america.html

Excerpt:

If we’re trying to prevent Covid surges and end the pandemic, then we need to center the population in our thinking. Health authorities need to get tools like rapid tests and better masks to as many people as possible, especially those who are more likely to spread disease, even if they’re at low risk themselves. People need to be persuaded or incentivized to vaccinate to protect others.

If you are sick, even with severe Covid, you want someone with a doctor’s viewpoint caring for you. America, however, is not a patient. And we’d all be better off, as a society and as individuals, if those in control of our country’s health stopped thinking of it that way.

Author(s): Aaron E. Carroll

Publication Date: 14 Jan 2022

Publication Site: NYT

Influence of the Peltzman effect on the recurrent COVID-19 waves in Europe

Link:https://pmj.bmj.com/content/early/2021/04/28/postgradmedj-2021-140234

Excerpt:

Epidemiologists report there is no precise definition for what is or is not an epidemic wave. ‘Waves’ are a phenomenon of infections that can develop during a pandemic. A wave implies a rising number of sick patients, a characteristic peak of illness and then a dramatic or sustained decline of infections reaching a baseline.1 Previous experiences with the Spanish influenza pandemic (1918) and seasonal influenza epidemics suggest further waves of COVID-19 are inevitable.2 The UK has endured the first two waves of the COVID-19 pandemic with widespread socioeconomic consequences and mortality.3 The WHO regional office for Europe has recently reported that incidence, hospitalisations and deaths in Central Europe, the Balkans and the Baltic states are among the highest globally suggesting a third wave of COVID-19.4 The reason for this third wave in Europe and anticipated further waves in countries with vaccine roll-out including the UK could be due to the Peltzman effect.

The Peltzman effect is named after Sam Peltzman, professor of economics at the University of Chicago Booth School of Business. It describes the concept of ‘Risk Compensation’.5 In this concept, it is argued that highway safety regulations were not reducing highway deaths. ‘Risk compensation’ is a theory that suggests that people typically adjust their behaviour in response to perceived levels of risk. It postulates that people become more careful where they sense greater risk and lesser careful if they feel more protected. Peltzman theorised that though the introduction of safety devices, like seat belts or air bags, reduced the ratio of fatalities to accidents, the rate of accidents was found to have risen enough to offset the decreased fatality rate. He proposed that though people felt safer driving with a seat belt, it probably led to a phenomenon of driving with less attentiveness or higher speed causing an increased risk of run-off-road crashes or similar accidents.

…..

COVID-19 vaccination triggering Peltzman effect—An analysis of Peltzman effect reveals four main factors contributing to risk compensation, all of which appear to be present in the current COVID-19 pandemic. To initiate an increase in risky behaviour, a measurable benefit must be ‘visible’, a criterion that COVID-19 vaccines meet. This is supported by the decreasing number of infections in vaccinated populations.7 Risk compensation is more likely to occur if people have a ‘motivation’ to take on a risky behaviour and if it is within their ‘control’ to do so. With the COVID-19 pandemic these two factors seem to have manifested as ‘pandemic fatigue’ with decreasing adherence to risk reduction strategies of social distancing, face coverings and hand washing in the population. Such behaviours of risk compensation have raised concerns about threat to global public health efforts to control the pandemic.8 The final factor, the overall effectiveness of the intervention, in this case of the COVID-19 vaccine, is being increasingly recognised worldwide.9 This is highly desirable, increasing the likelihood of vaccine-acquired ‘herd immunity’. However, for the Peltzman effect, this high efficacy is likely to reduce adherence to other safety precautions. Vaccination drives in most European countries started in late December 2020, after which the rise of cases was seen. Thus, people’s complacency and a false sense of increased security after vaccination may have been the possible reasons for people to abandon protective and preventive behavioural strategies.

Author(s): Karthikeyan P Iyengar1, http://orcid.org/0000-0003-1701-4970Pranav Ish2, http://orcid.org/0000-0001-7998-2980Rajesh Botchu3, http://orcid.org/0000-0003-4164-7380Vijay Kumar Jain4, http://orcid.org/0000-0002-9577-9533Raju Vaishya5

Publication Date: April 2021

Publication Site: BMJ Journals

Wealth and Insurance Choices: Evidence from US Households

Link: http://public.kenan-flagler.unc.edu/faculty/kuhnenc/RESEARCH/gropper_kuhnen.pdf

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Abstract:

Theoretically, wealthier people should buy less insurance, and should self-insure through saving instead, as insurance entails monitoring costs. Here, we use administrative data for 63,000 individuals and, contrary to theory, find that the wealthier have better life and property insurance coverage. Wealth-related differences in background risk, legal risk, liquidity constraints, financial literacy, and pricing explain only a small
fraction of the positive wealth-insurance correlation. This puzzling correlation persists in individual fixed-effects models estimated using 2,500,000 person-month observations. The fact that the less wealthy have less coverage, though intuitively they benefit more from insurance, might increase financial health disparities among households.

Author(s): Michael Gropper, Camelia M. Kuhnen

Publication Date: 16 July 2021

Publication Site: University of North Carolina

We need to design distrust into AI systems to make them safer

Link: https://www.technologyreview.com/2021/05/13/1024874/ai-ayanna-howard-trust-robots/

Excerpt:

Since that experiment, have you seen this phenomenon replicated in the real world?

Every time I see a Tesla accident. Especially the earlier ones. I was like, “Yep, there it is.” People are trusting these systems too much. And I remember after the very first one, what did they do? They were like, now you’re required to hold the steering wheel for something like five-second increments. If you don’t have your hand on the wheel, the system will deactivate.

But, you know, they never came and talked to me or my group, because that’s not going to work. And why that doesn’t work is because it’s very easy to game the system. If you’re looking at your cell phone and then you hear the beep, you just put your hand up, right? It’s subconscious. You’re still not paying attention. And it’s because you think the system’s okay and that you can still do whatever it was you were doing—reading a book, watching TV, or looking at your phone. So it doesn’t work because they did not increase the level of risk or uncertainty, or disbelief, or mistrust. They didn’t increase that enough for someone to re-engage.

Author(s): Karen Hao

Publication Date: 13 May 2021

Publication Site: MIT Tech Review

The Cost of Insuring Colleges Continues to Rise. And Covid’s Not the Reason.

Link: https://www.chronicle.com/article/the-cost-of-insuring-colleges-continues-to-rise-and-covids-not-the-reason?cid2=gen_login_refresh&cid=gen_sign_in

Excerpt:

Colleges face an increasingly complex and unpredictable array of challenges — abuse, harassment, assault, police misconduct, accidents, health and environmental hazards, fiduciary wrongdoing, the pandemic — that are making it more difficult to calculate risk and insure against it.

That’s a big part of why annual insurance premiums have gone up by double digits in recent years. John McLaughlin, senior managing director of the higher-education practice at Gallagher, an insurance brokerage and risk-management and consulting firm, says those increases range between an average of 10 and 35 percent across an institution’s insurance portfolio.

….

But what’s striking is that just behind enrollment on colleges’ list of worries are two areas that are not directly related to Covid: data security and Title IX. That’s according to an annual survey by United Educators, which provides liability insurance and risk-management services for its member colleges and schools. The survey was conducted from May 2019 through September 2020, as the coronavirus crisis unfolded, and 480 United Educators member institutions responded.

Author(s): Alexander C. Kafka

Publication Date: 3 March 2021

Publication Site: Chronicle of Higher Education

The origin of COVID: Did people or nature open Pandora’s box at Wuhan?

Link: https://thebulletin.org/2021/05/the-origin-of-covid-did-people-or-nature-open-pandoras-box-at-wuhan/

Excerpt:

A tale of two theories. After the pandemic first broke out in December 2019, Chinese authorities reported that many cases had occurred in the wet market — a place selling wild animals for meat — in Wuhan. This reminded experts of the SARS1 epidemic of 2002, in which a bat virus had spread first to civets, an animal sold in wet markets, and from civets to people. A similar bat virus caused a second epidemic, known as MERS, in 2012. This time the intermediary host animal was camels.

….

Contrary to the letter writers’ assertion, the idea that the virus might have escaped from a lab invoked accident, not conspiracy. It surely needed to be explored, not rejected out of hand. A defining mark of good scientists is that they go to great pains to distinguish between what they know and what they don’t know. By this criterion, the signatories of the Lancet letter were behaving as poor scientists: They were assuring the public of facts they could not know for sure were true.

….

One of the very few establishment scientists to have questioned the virologists’ absolute rejection of lab escape is Richard Ebright, who has long warned against the dangers of gain-of-function research. Another is David A. Relman of Stanford University. “Even though strong opinions abound, none of these scenarios can be confidently ruled in or ruled out with currently available facts,” he wrote. Kudos too to Robert Redfield, former director of the Centers for Disease Control and Prevention, who told CNN on March 26, 2021 that the “most likely” cause of the epidemic was “from a laboratory,” because he doubted that a bat virus could become an extreme human pathogen overnight, without taking time to evolve, as seemed to be the case with SARS2.

Author(s): Nicholas Wade

Publication Date: 5 May 2021

Publication Site: Bulletin of the Atomic Scientists

‘The Premonition’ Review: A Pandemic of Experts

Link: https://www.wsj.com/articles/the-premonition-review-a-pandemic-of-experts-11620078624

Excerpt:

The article, in any case, doesn’t claim that 180,000 people could have been saved by more robust public-health interventions in early 2020 but that those deaths are mostly the result of Americans’ poor health. That the U.S. death rate, even so, is lower than that of the U.K. and Italy and nearly equal to that of France — all G7 nations — rather complicates Mr. Lewis’s breezy thesis.

It is amazing to me that intelligent people in 2021 can survey the past year and conclude that some alternative set of non-pharmaceutical interventions would have made an appreciable difference in the spread of this magnificently resilient virus. But many such people do believe that, including the author of this book and its ostensible heroes. One of those heroes, an accomplished hospital administrator named Carter Mecher, drew up a national pandemic response plan for the George W. Bush administration. The key to stopping dangerous pathogens, he came to believe as he studied pandemic modeling, was closing schools.

….

Here is a point that Mr. Lewis’s heroes show no awareness of grasping: that the United States is a big unruly country in which people are accustomed to going where they please and don’t care for government authorities telling them what to do based on poorly understood “data.” One of the Wolverines, a public-health official in Santa Barbara County named Charity Dean, appears to believe that any sign of a dangerous contagion permits health authorities to assume dictatorial powers. She tells Mr. Lewis that in early 2020 California should have closed its borders “until it figured out exactly how much virus was circulating, and where” and that the U.S. should follow Thailand’s example and require “anyone entering the country to wear a GPS wristband” and so enable the authorities to know who’s disobeying quarantine rules.

Author(s): Barton Swaim

Publication Date: 3 May 2021

Publication Site: Wall Street Journal

Book Link: https://amzn.to/3xLQZzS