The use of electronic health records in insurance underwriting has long held terrific potential to boost the industry. Progress has been slow to date, but that is about to change.
By late-2022, EHR will be standard at 50% of the top 20 carriers, said Nicholas Irwin, director of life underwriting at Verisk.
“I think once we get to that 50% hit rate threshold and same-day turnaround time, I’d be very surprised it didn’t become a standard at that point,” Irwin said Tuesday during the Society of Insurance Research annual conference.
The acquisition of a medical record, a crucial part of life underwriting risk-assessment, largely remains largely an inefficient paper process. The availability of healthcare information as a data stream is a critical advantage for insurers using rules-based decision engines for accelerated underwriting.
However, Modern Portfolio Theory may have a problem going forward. Don’t worry, we are not going to hack on bonds based on a fear that yields may rise in the future, creating a portfolio drag. There are already enough bond haters out there. The issue we are seeing goes beyond just the bond argument – correlations have been rising just about everywhere. In today’s world, correlations have been changing, with more and more asset classes becoming increasingly correlated. The problem: when the correlations between investments are higher, it becomes harder to diversify risk in a portfolio.
Let’s start with the big one, global bonds and global equities. Combining equities and bonds has benefitted from a generally negative correlation for much of the past few decades. However, this correlation has turned positive of late (chart 1), implying reduced diversification benefits when combining bonds and equities. This isn’t too much of a concern, given that the long-term average is slightly positive.
But don’t throw out your bonds just yet. This correlation tends to return to be strongly negative during risk-off periods in the equity markets. This reflex action during corrections helps maintain bonds in portfolios, even if they experience periods of low or even negative performance.
For a relatively small number of decedents, this plan could run headlong into Biden’s promise to not raise taxes on those with incomes below $400,000. Of course, the vast majority of decedents will have unrealized gains of far less than $1 million. Indeed, most will leave entire estates far below that threshold. Among people over 70, about 83 percent live in a household with total net worth of less than $1 million.
But some people with large unrealized gains will have been living on relatively low incomes. Imagine someone who is retired and living on Social Security, a modest pension, and some savings. But they still are holding that Microsoft stock they bought in 1987.