Munich Re on how reinsurance can shape the L&H market

L&H leader on de-risking ageing society challenges

Munich Re on how reinsurance can shape the L&H market

Life & Health

By Mia Wallace

With governments under increasing pressure to bridge ever-widening life and health protection gaps, the role of re/insurance in supporting clients beyond just traditional risk transfer mechanisms is more visible than ever.

In conversation with Re-Insurance Business, Munich Re’s Mari-Lizette Malherbe (pictured), shared how the reinsurance market can and is answering the call to facilitate the development of new products, services and more proactive propositions, spotlighting the influence of digital health.

“Digital health is a very big umbrella and we’re looking to cut a bit through the noise,” she said. “It can be overwhelming to understand what it means for our industry. For us, it has been about focusing on things which are going to make a material impact for the industry but also the millions of customers the industry serves.”

Changing the conversation on digital health

Conversations about digital health tend to evolve rapidly as there’s always some new source of data or new technology that people want to explore. But for Malherbe, a member of Munich Re’s board of management with responsibility for Life and Health, it’s important to look at it the other way around. “Let’s look first at what our pain points are as an industry and what problems we need to solve,” she said. “Then we can look at the ever-increasing catalogue of solutions and fit the right solution to the right problem to solve that pain point.”

There are three key strands to this strategy at Munich Re – the first is efficiency and the question of how to automate and improve the customer journey. Medical underwriting is a big part of the L&H insurance process, she said, and certainly, from the customer’s perspective, it’s probably the most unpleasant part because it involves answering tedious questionnaires or undergoing time-consuming and invasive tests.

To solve this pain point, Munich Re has invested heavily in providing technology for automated underwriting which it’s now looking to take to the next level by bringing in sources of external third-party data to assess applicants’ health status, reducing the burden on them to provide information.  Using AI techniques, the company is able to summarize electronic health records, enabling an underwriter to arrive at a final decision much more quickly.

“A big area of focus for us is on the underwriting side, but also on the claims journey,” she said. “Because, again, the claims journey comes with a lot of onus on people to provide sometimes very complex medical data to substantiate their claim. So, we have developed our CLARA solution which uses structured data and automation to increase consistency of decision making and reduce the time it takes to assess claims by up to 50%.

“It’s a triaging system that can check certain parameters to determine whether it’s a very simple claim or a more complex one which requires further investigation. Claims and underwriting are where we see the core of our value as a reinsurer because it’s all to do with understanding and selecting and pricing risk effectively, which is a huge part of our value proposition.”

What are the major trends in L&H reinsurance?

Among some of the other trends sweeping the sector today, Malherbe noted concerns about ageing societies. It’s a big topic on the agenda of governments as well as industry, she said. A healthy society by age demographics is usually shaped like a Christmas tree, she said, where the distribution leans towards the younger ages and decreases as the age increases.

“But in many of the more advanced economies it’s now starting to look more like the trunk of a Christmas tree, with the ratio of younger lives to older lives switching out,” she said. “Also, people are living longer into their old age but, unfortunately, a lot of research is showing that they’re living longer in poor health.”

One of the most pressing considerations is what this ageing population means for old age provisions i.e. pensions – both state and privately held. “In many parts of the world, with the UK and the US being prime examples, you have pension pots where people are eligible to receive a pension from their former employer, and this is quite a burden on individual companies.”

Malherbe noted that many large corporate companies which provided a pension provision for their employees over the years now sit on a very large liability. They’re on the hook to pay for these pensions, she said, and the amount has increased since they set up these plans because the average life expectancy has increased. “Again, this is where, as the life and health reinsurance industry, we play an important part,” she said.

“Because for companies to be able to provide those pensions and stand behind those promises, they also need to take out some of the risk that people live longer than expected.”

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