Brian SussmanUnderwriting and Claims Technical Services ManagerRGA Reinsurance Company of Australia Limited

WelcomeDear Colleagues,Welcome to the September 2016 edition of RGA Australia’s ReView newsletter. The cold winds of winterare starting to weaken, and while we look forward to warming temperatures, a hot blast of media criticismhas continued to be directed towards the Australian life insurance industry. I shall leave it to industryspokespersons who are better equipped to respond to such criticism, but it is important to remember thatthe industry is the provider of the most valuable form of protection against the financial impact of death,disablement or critical medical events and therefore has a vital role to play in the financial well-being ofthe community. Insurers and reinsurers must at the same time ensure that the protection provided by lifeinsurance is both sustainable and affordable for the community.

RGA Australia is heading towards the final quarter of its 20th anniversary year, and we look forward towelcoming both RGA CEO Greig Woodring and RGA President Anna Manning, who will join us during thefinal period of these celebrations.

In this edition we provide readers information on some important developments here and around theworld in medicine, product issues, claims experience and the area of risk control.

In “Chronic Lymphocytic Leukaemia and Its Challenges for Insurers,” Dr. Sheetal Salgaonkar,Medical Director, Medical Services, for RGA Services India Private Limited, discusses how theclinical understanding and treatment of chronic lymphocytic leukaemia (CLL), the most prevalentadult leukaemia, has changed over the past decade, and what the prognostic implications are forinsurers.Meredith Barnes, Head of Underwriting & Technical Services, RGA Reinsurance Company ofAustralia Limited, in her article “Standard Trauma Definitions: Learning from Experience inOther Markets” discusses the development and impact in other markets of standardised traumadefinitions, and asks us to consider what such changes are designed to achieve.Patrick Reen, Senior Valuations Actuary, RGA Reinsurance Company of Australia Limited, providesa high-level summary of 15 years of RGA Australia’s individual business claims experience in“Analysing Historical Claims Experience.”The term “audit” can provoke feelings of apprehension, but RGA’s Global Audit Service is in factdesigned to provide our reinsurance partners and us with confidence in the progress of thepartnership. In “Understanding RGA’s Global Audit Service”, Joe Hoft, Head of Internal Audit,and Yee Wing Li, Audit Manager (Asia Pacific), explain how this service, at no cost to the insurer,provides opportunities to identify how the best results can be – and are – achieved.You can meet the newest additions to the RGA Australia team in “New Appointments.”

Our team continues its commitment to working closely with you, our partners, and encourages you tocontact your RGA representative if you require assistance on any matter.

Sheetal Salgaonkar, M.D.Medical DirectorRGA Services India Private Limited

Chronic Lymphocytic Leukaemia andIts Challenges for Insurers

Chronic lymphocytic leukaemia (CLL) is a slow-developing cancer that is characterised by theoverproduction and accumulation of small, mature-appearing (but functionally incompetent) Blymphocytes in blood, bone marrow and lymphoid tissues.

CLL is the most common adult leukaemia in Western societies, with an annual incidence of 4.2 in 100,000individuals. CLL diagnoses each year in Australia number approximately 1,000, while in New Zealandaround 120 people are diagnosed with CLL. The disease is relatively rare in Asia and Africa; however,the reason for this geographical diversity is not clear. The cause and development of CLL are suspectedto be due to genetic rather than environmental factors.

The risk of developing CLL increases progressively with age. Nearly 70% of patients are 65 years of ageor older, and its risk is 2.8 times higher for men than for women.

DiagnosisCLL was once thought to be a homogenous static disease, in which B lymphocytes accumulated largelybecause they lacked normal cell death. Recent research, however, has established CLL as aheterogeneous disease exhibiting constant turnover of malignant B lymphocytes at varying rates. Thisheterogeneity translates into the need for varying clinical courses and responses to treatment.

More than 80% of CLL patients are diagnosed incidentally. Ten percent of CLL patients present with thecharacteristic symptoms of fever and night sweats, and approximately 20% to 50% present with enlargedand palpable lymph nodes and/or enlarged liver and spleen. A small percentage also experienceunexplained weight loss and frequent infections.

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8 3

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5,6

Clonality of the circulating B lymphocytes as confirmed by flow cytometryThe presence of atypical lymphocytes, cleaved cells or prolymphocytes that do not exceed 55% ofperipheral lymphocytesLymphocytes that are monoclonal B lymphocytes, expressing B lymphocyte surface antigensCD19, CD20, and CD23 with low surface immunoglobulin and the T-cell antigen CD5Each clone of leukaemia cells that is restricted to expression of either kappa or lambdaimmunoglobulin light chains

Small lymphocytic lymphoma (SLL) is considered the same as CLL by the 2008 World HealthOrganization (WHO) classification of haematological malignancies because of their identicalimmunophenotypes. A confirmed diagnosis of SLL requires the presence of lymphadenopathy and/orsplenomegaly, and an absolute lymphocyte count in the peripheral blood of less than 5 × 10 /l.

Monoclonal B-cell lymphocytosis (MBL), which today is recognised as a precursor condition to CLL, wasfirst described in 2005. MBL is currently defined as the presence of fewer than 5,000 monoclonal Blymphocytes/μl in the blood in the absence of lymphadenopathy, organomegaly or cytopaenia. Based onthe size of the clone, MBL can be segregated into two groups:

Clinical or high-count MBL with ≥0.5 × 10 /l clonal B cells. This is a preleukaemic disorder;progression to CLL occurs in 1% to 2% of MBL cases per year.Low-count MBL with <0.5 ×10 /l clonal B cells. This is seen in approximately 5% of the generalpopulation, especially among individuals older than age 70. It has little or no apparent clinicalsignificance.

Table 1 (below) lists the diagnostic differentiators for CLL, SLL and MBL.

TABLE 1: DIAGNOSTIC DIFFERENTIATORS FOR CLL, SLL AND MBL

CLL SLL MBL

Clonal B cells in peripheral blood ≥5000/ul <5000/ul <5000/ul

Lymphadenopathy/organomegaly Possible Yes No

Disease-related symptoms Possible Possible No

Lymph node biopsy Not required Required Not required

Two clinical staging systems are used to predict CLL median survival rates (Table 2 below). In Europeand Australia, the Binet staging system is more widely used, whereas the U.S. uses the Rai system.

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include theDiagnostic criteria for CLL developed by the National Cancer Institute’s Working Groupfollowing:

A peripheral blood B lymphocyte count of at least 5 × 109/l (5,000/ μl)

15,16

Binet B thrombocytes ≥100 × 10 /l,≥3 lymph node regions

>8 years

Binet CHb <10.0g/dl, thrombocytes <100 × 10 /l

6.5 years

Rai system

Low risk >10 years

Rai 0 Lymphocytosis >15 × 10 /l

Intermediate risk >8 years

Rai I Lymphocytosis and lymphadenopathy

Rai IILymphocytosis and hepatomegaly and/or splenomegalywith/without lymphadenopathy

High risk >6.5 years

Rai IIILymphocytosis and Hb <11.0 g/dl with/withoutlymphadenopathy/organomegaly

Rai IVLymphocytosis and thrombocytes <100 × 10 /l with/withoutlymphadenopathy/organomegaly

TreatmentThere is currently no evidence that early, risk factor-guided intervention with chemoimmunotherapy canalter the natural course of early-stage CLL. “Watch and wait,” therefore, remains the standard first-linecare for patients with early-stage asymptomatic CLL.

For active symptomatic CLL, the International Workshop on CLL (IWCLL) has specified the followingcriteria for treatment:

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TABLE 2: BINET AND RAI STAGING SYSTEMS FOR CLL

Stage Definition Median Survival

Binet system

Binet AHaemoglobin (Hb) ≥10.0 g/dl,thrombocytes ≥100 × 109/l, <3 lymph node regions

>10 years

Hb ≥10.0g/dl,

20,21

Very high riskdel(17p)*/TP53 mutationand/or BIRC3 mutation

TP53-independent drugs (e.g., rituximab)Bruton’s tyrosine kinase (BTK) inhibitorsAllogeneic hematopoietic stem cell transplantation (HSCT)

High riskdel(11q)*/ ATM gene and/orNOTCH1 gene mutationand/or SF3B1 gene mutation

Fludarabine, cyclophosphamide, rituximab (FCR)

Intermediate riskTrisomy 12 Normal karyotype/FISH

Watch and wait

Low risk Isolated del(13q)* Watch and wait

*higher percentages of deleted nuclei have negative impact on prognosis

Whether to administer chemoimmunotherapy depends on patient age (e.g., >65 to 70), fitness level score of >6 (as measured by the Cumulative Illness Rating Scale [CIRS]) and renal function (e.g., creatinine clearance <30 to 50 ml/min).23

Some considerations for underwriting and claimsCLL is undergoing a rapid and exciting transition. What was once a fatal disease for many can now be controlled for extended periods of time using relatively well-tolerated therapies with very modest long-term risks.

An increasing focus on and use of molecular genetics will further change CLL by enabling superior prognostication and treatment strategies. As the understanding of and treatment frameworks for this condition continue to evolve, so are its underwriting risk classifications. Some early-stage favourable cases now exhibit insurable (albeit moderately reduced) life expectancies. Morbidity concerns with CLL, however, still are negatively impacting the ability to consider applications for any type of living benefits coverage.

Category Associated Genetic Factors Therapeutic Strategies

TABLE 3: PROGNOSTIC SUBGROUPS AND ASSOCIATED RISK GENETIC FACTORS IN CLL ATDIAGNOSIS9,10,11,12,13,14,19

Unintentional weight loss of 10% or more within the previous six monthsSignificant fatigueFevers higher than 38.0 C for two or more weeks without other evidence of infectionNight sweats for more than one month without evidence of infectionCytopaenia not caused by autoimmune phenomenaSymptoms or complications from lymphadenopathy, splenomegaly or hepatomegalyLymphocyte doubling time (LDT) of less than six months (only in patients with more than 30,000lymphocytes/l [30 × 109/l])Autoimmune anaemia and/or thrombocytopaenia poorly responsive to conventional therapy

The main progress in CLL treatment is with molecular genetics, and it often drives treatment decisions.Front-line treatment of CLL is based mainly on the stage and the specific genetic mutation expressed.

3. Monserrat E, Hillmen P. Chronic Lymphocytic Leukemia. From Hoffbrand V (ed), Higgs DR, KeelingDM, Mehta AB. Postgraduate Haematology 7ed, Wiley, Chapter 27.

4. Malhotra, H, Kumar L, Malhotra P, Hiwase D, Bhatia R, Chronic Leukemias. From Kerr DJ, HallerDG et al. (eds.) Oxford Textbook of Oncology 3ed, Oxford University Press, Chapter 52.

5. Guièze R, Wu CJ. Genomic and epigenomic heterogeneity in chronic lymphocytic leukemia. Blood.2015 Jul 23; 126(4):445-53.

6. Wierda WG, O'Brien S, Wang X et al. Prognostic nomogram and index for overall survival inpreviously untreated patients with chronic lymphocytic leukemia. Blood. 2007 Jun 1; 109(11):4679-85.

7. Leukaemia Foundation. Chronic Lymphocytic Leukaemia (CLL)http://www.leukaemia.org.au/blood-cancers/leukaemias/chronic-lymphocytic-leukaemia-cll

8. Chronic Lymphocytic Leukaemia (CLL) – A guide for patients, families & whānau.http://www.leukaemia.org.nz

9. Puiggros A, Blanco G, Espinet B. Genetic abnormalities in chronic lymphocytic leukemia: where weare and where we go. BioMed Research International. Vol. 2014, Article ID 435983, 13 pages.

10. Rossi D, Rasi S, Spina V et al. Integrated mutational and cytogenetic analysis identifies newprognostic subgroups in chronic lymphocytic leukemia. Blood. 2013 Feb 21; 121(8):1403-12.

11. Tam CS, Shanafelt TD, Wierda WG et al. De novo deletion 17p13.1 chronic lymphocytic leukemiashows significant clinical heterogeneity: the M.D. Anderson and Mayo Clinic experience. Blood.2009 Jul 30; 114(5):957-64.

12. Hernández JA, Rodríguez AE, González M et al. A high number of losses in 13q14 chromosomeband is associated with a worse outcome and biological differences in patients with B-cell chroniclymphoid leukemia. Haematologica. 2009 Mar; 94(3):364-71.

13. van Dyke DL, Shanafelt TD, Call TG et al. A comprehensive evaluation of the prognosticsignificance of 13q deletions in patients with B-chronic lymphocytic leukaemia. The British Journalof Haematology. 2010 Feb; 148(4):544-50.

1. Kipps TK. Chronic Lymphocytic Leukemia and Related Diseases. In Kaushansky K, Lichtman MA,Beutler E et al. Williams Hematology 8th edition. McGraw-Hill 2010. Chapter 94.

2. Kipps TK. Chronic Lymphocytic Leukemia and Related Diseases. In Kaushansky K, Lichtman MA,Beutler E et al. Williams Hematology 8th edition. McGraw-Hill 2010. Chapter 94.

When claims assessors are presented with claims for terminal illness benefits, they need to carefully consider how promising new therapies for relapsed, refractory and high-risk CLL have shown a remarkable increase in overall survival and progression-free survival. As a result, the terminal illness definition may no longer apply in an increasing number of cases.Further development of critical illness products and expansion of coverage for cancer because of changes to the definition are reasons for insurers to carefully evaluate precursor CLL conditions, such as high-count MBL, along with early-stage CLL to prevent unanticipated claims, as these conditions may not meet the “serious illness” spirit of the product, given their long life expectancies and the “watch and wait” treatment approach.Survival in CLL patients has improved significantly; many new targeted therapies are improving not only response rates and progression-free survival, but also overall survival. As these trends continue to evolve, insurers need to watch and track them carefully.

References

22. Schweighofer CD, Cymbalista F, Müller C et al. Early Versus Deferred Treatment With CombinedFludarabine, Cyclophosphamide and Rituximab (FCR) Improves Event-Free Survival In PatientsWith High-Risk Binet Stage A Chronic Lymphocytic Leukemia – First Results of a RandomizedGerman-French Cooperative Phase III Trial. Blood. 2013 May; 123(21):3255-62.

23. Eichhorst B, Goede V, Hallek M. Treatment of elderly patients with chronic lymphocytic leukemia.Leuk Lymphoma. 2009 Feb; 50(2):171-8.

24. Understanding Chronic Leukaemia – A guide for people with cancer, their families and friends.Cancer Council NSW 2016. ISBN 978 1 925136 79 1.

3. Monserrat E, Hillmen P. Chronic Lymphocytic Leukemia. From Hoffbrand V (ed), Higgs DR, KeelingDM, Mehta AB. Postgraduate Haematology 7ed, Wiley, Chapter 27.

4. Malhotra, H, Kumar L, Malhotra P, Hiwase D, Bhatia R, Chronic Leukemias. From Kerr DJ, Haller DG et al. (eds.) Oxford Textbook of Oncology 3ed, Oxford University Press, Chapter 52.

5. Guièze R, Wu CJ. Genomic and epigenomic heterogeneity in chronic lymphocytic leukemia. Blood. 2015 Jul 23; 126(4):445-53.

6. Wierda WG, O'Brien S, Wang X et al. Prognostic nomogram and index for overall survival in previously untreated patients with chronic lymphocytic leukemia. Blood. 2007 Jun 1; 109(11): 4679-85.

7. Leukaemia Foundation. Chronic Lymphocytic Leukaemia (CLL)http://www.leukaemia.org.au/blood-cancers/leukaemias/chronic-lymphocytic-leukaemia-cll

8. Chronic Lymphocytic Leukaemia (CLL) – A guide for patients, families & whānau.http://www.leukaemia.org.nz

9. Puiggros A, Blanco G, Espinet B. Genetic abnormalities in chronic lymphocytic leukemia: where we are and where we go. BioMed Research International. Vol. 2014, Article ID 435983, 13 pages.

10. Rossi D, Rasi S, Spina V et al. Integrated mutational and cytogenetic analysis identifies new prognostic subgroups in chronic lymphocytic leukemia. Blood. 2013 Feb 21; 121(8):1403-12.

11. Tam CS, Shanafelt TD, Wierda WG et al. De novo deletion 17p13.1 chronic lymphocytic leukemia shows significant clinical heterogeneity: the M.D. Anderson and Mayo Clinic experience. Blood. 2009 Jul 30; 114(5):957-64.

12. Hernández JA, Rodríguez AE, González M et al. A high number of losses in 13q14 chromosome band is associated with a worse outcome and biological differences in patients with B-cell chronic

13.

14. Dal Bo M, Rossi FM, Rossi D et al. 13q14 deletion size and number of deleted cells both influenceprognosis in chronic lymphocytic leukemia. Genes, Chromosomes and Cancer. 2011 Aug; 50(8);633-43.

15. Hallek M, Cheson BD, Catovsky D et al. Guidelines for the diagnosis and treatment of chroniclymphocytic leukemia: a report from the International Workshop on Chronic Lymphocytic Leukemiaupdating the National Cancer Institute – Working Group 1996 guidelines. Blood. 2008 Jun 15;111(12):5446-56.

16. Cheson BD, Bennett JM, Grever M et al. National Cancer Institute-sponsored Working Groupguidelines for chronic lymphocytic leukemia: revised guidelines for diagnosis and treatment. Blood.1996 Jun 15; 87(12):4990-7.

17. Swerdlow SH, Campo E, Harris NL et al. WHO Classification of Tumors of Haematopoietic andLymphoid Tissues 4e. Lyon, France: IARC Press; 2008.

18. Marti GE, Rawstron AC, Ghia P et al. Diagnostic criteria for monoclonal B-cell lymphocytosis.British Journal of Haematology. 2005 Jun 1; 130(3):325-32.

19. Delgado J, Santacruz R, Baumann T, Montserrat E. New developments in chronic lymphocyticleukemia diagnosis. European Oncology & Haematology. 2013; 9(2):114-8.

20. Binet JL, Auquier A, Dighiero G et al. A new prognostic classification of chronic lymphocyticleukemia derived from a multivariate survival analysis. Cancer. 1981 Jul 1; 48(1):198-206.

21. Rai KR, Sawitsky A, Cronkite EP et al. Clinical staging of chronic lymphocytic leukemia. Blood.1975 Aug; 46(2):219-34.

Meredith BarnesHead of Underwriting & Technical ServicesRGA Reinsurance Company of Australia Limited

Standard Trauma Definitions: Learningfrom Experience in Other Markets

RGA recently hosted a luncheon discussion about the various models of standardised trauma definitions used around the world, their pros and cons, and what problem the industry is trying to solve with trauma insurance. This article focuses on standardised trauma definitions.

As life insurers in Australia consider introducing standard trauma definitions for the “big four” conditions (heart attack, coronary artery bypass surgery, stroke and cancer), it’s an opportune time to consider what standardised definitions aim to achieve. What variables go into choosing a model and developing definitions?

A number of countries with similar products, notably the United Kingdom (UK), South Africa, Canada and India, have standardised definitions. Their approaches, however, are anything but standard, with each country taking a different course.

In the UK the Association of British Insurers (ABI) maintains “minimum standard definitions” for the majority of conditions that are reviewed every three years. Companies can offer cover that is more generous than the standard but not less so. The result is that virtually no company uses the “minimum standard definitions.” More generous definitions tend to be the norm. There is no requirement to pass-back changes, and the minimum that is applicable to a policy is that which applied when the policy commenced.

In South Africa, under the auspices of the Standardised Critical Illness Definitions Project (SCIDEP), there are 16 standard definitions that cover varying levels of severity across the big four conditions. Although the definitions are standardised, the percentage of benefit that is payable for each is up to the discretion of each company.

In Canada, standards are voluntary. Initially, all insurers used the standard definitions, but in a market where premiums are guaranteed, deviation is now the norm – often on the side of conservatism.

Definitions are the subject of legislation in India, with terms for the “most impactful” 11 conditions mandated for all companies.

So what can we in Australia learn from the experiences in these markets? Ultimately, it comes down to this: What problem are we trying to solve? Is the aim of standardisation to provide clarity? Promote consumer confidence? Equity of result? Arguably, each approach to standardised definitions provides at least some degree of benefit across all of these areas. However, each is structured to solve a slightly different problem or set of problems.

If consistency is the aim, then the Indian approach surely provides the greatest degree of both certainty and equity. However, it stifles product development and competition, and doesn’t allow companies to develop products for alternative price points. Consistency here doesn’t mean that the definitions fit consumer expectations – only that all companies will meet or fail their expectations equally.

Consumer confidence did initially rise in the UK after the introduction of minimum standards. Customers were assured that their policies met at least the standard of their time. It allows a reasonable degree of differentiation with companies aiming to offer cover “better than” what is required. Minimum standards, however, don’t ensure currency of medical definitions. This is one of the greatest challenges here, given pass-back limitations under the Insurance Contracts Act (1984). While they do allow for competition, they can be difficult to apply to scaled or severity- based policies. They also do not necessarily provide a consistent outcome between companies.

South Africa seems to have attempted to balance consistency and competitiveness by allowing some competition within its benefit payments scale (other than for those conditions paying 100%, which must use the standard definition). But the result is very complicated.

As for Canada, it’s hard to see how voluntary standards (especially when not followed) provide any consumer value at all.

Knowing all of this, would Australia benefit from any form of standardised definitions? A minimum standards approach seems to be where we may be headed. Some would argue that to a large degree we are already there. Consumers, for the most part, rely on advice in determining which product to purchase; the advice process, in turn, largely relies on research software in assisting product selection. It could be argued that research software has already provided Australian consumers (albeit indirectly) with both minimum standards and a degree of equity that are at least equal to that of the UK, so how much difference would it make if we codified these “minimum” standards? Probably not a great deal.

Therein lies the rub. What is it that consumers expect to be delivered via standardisation? Change, for one thing. Areas of concern demonstrated in recent media include the fact that policy terms don’t always align to medical diagnoses. In many cases, policy terms are looking for a minimum degree of severity. That misalignment in expectations won’t be solved by standardising definitions alone.

Currency is another consumer concern, but pass-backs aren’t as simple in reality as they appear to be on paper. There are costs to consumers, the limitations set by the Act, and a rapidly changing medical environment where diagnoses and treatment (not to mention the severity of impact a condition might have) evolve quickly.Any attempt to reassure consumers through the development of minimum standards will need to take into account how these standards are communicated to consumers and what benefit consumers can expect from them. Minimum standards or not, the industry can still challenge itself to be more transparent about how benefits are described and to explain the circumstances in which a benefit would or would not be payable. It’s also worth exploring whether there are alternative definitions less reliant on medical terminology that consumers could better understand. The insurance industry here won’t stop being accused of ‘hiding in the small print’ (whatever size it is) until these issues are addressed.

By Patrick ReenSenior Valuations ActuaryRGA Reinsurance Company of Australia LimitedWith assistance from Fabrizio Tettoni, Reporting & Analytics Manager, and TikiriAppuhamy, Actuarial Analyst

Analysing Historical Claims Experience

BackgroundRGA Australia conducts regular investigations into claims experience on its Australia and New Zealandlife insurance business. Such investigations can help insurers identify any emerging trends, some ofwhich may be unforeseen, and if necessary take appropriate remedial actions.

This note sets out some observations from a recent deeper dive into causes of claims on individual lifebusiness.

Claims were allocated to causes for a representative sample of over 40,000 claims. The sample wastaken from across all RGA Australia and New Zealand cedants and covers the period 2000-2015. Thedata was tested to confirm a 90% probability of an error rate of less than 5% in the allocation process.

The analysis below covers individual life business only.

Leading Claim CausesFor the general Australian population, the most common contributory causes to disability-adjusted lifeyears are (1) back and neck injuries, (2) circulatory system conditions, (3) depression and (4)musculoskeletal conditions.

Depression and musculoskeletal conditions are more common in Australia than in other high-incomecountries .

The table below shows that this is largely mirrored in insurance data – mental and behavioural andmusculoskeletal and connective tissue conditions rank as the second and third causes of disabilityincome claims.

Top Cause Second Third

Disability IncomeInjury or Accident(37%)

Mental & Behavioural(10%)

Musculoskeletal &Connective Tissue (10%)

Trauma/Crisis Cancers (59%)Circulatory System(27%)

Nervous System (4%)

TPDInjury or Accident(18%)

Cancers (16%)Mental & Behavioural(16%)

Death/Terminal Illness Cancers (41%)Circulatory System(16%)

Injury or Accident (8%)

1

Emerging Trends?Across benefits, the claims split by major cause has been stable over time for most causes. The graphbelow highlights two potential emerging trends.

1. Suicide deaths among the insured population have declined since 2008, from around 4.5% ofclaims with specified causes to around 3.5% in 2015.

2. Trauma claims due to circulatory system causes have increased from around 24% in 2008 to28.5% in 2015.

When examining claim trends, it is important to consider other developments in both the prevailingmedical environment and the industry itself. South Korea, for example, has, in the recent past, seen anincrease in the incidence of thyroid cancer; however, this was consistent with a significant increase in thegovernment’s promotion of screening for this cancer and the consequential increase in the level oftesting.

A Deeper Look at Trauma ClaimsThe graphs below break down trauma causes into further detail.

Note that although circulatory system conditions are the second biggest cause group for trauma claimsoverall, heart attacks only rank seventh for females. However, heart attacks rank second for males.

Clearly, cancers are significant contributors to trauma claims, particularly prostate and breast cancer.

It is useful to note that, for females, multiple sclerosis makes up the majority of “other nervous system”claims.

For trauma cancer claims, breast cancer makes up around 54% of claims for women (compared toaround 33% of death claims), and prostate cancer around 30% of claims for men (7% of death claims).

The graph below shows the proportion of trauma cancer claims due to a selection of causes.

The graph below shows how the cancer claim cause proportions vary by age group for Trauma. Theobserved trends are anecdotally consistent with the general population.

The incidence profiles of different cancers are quite distinct across ages. It is important for life insurers to consider how developments in the insurance and medical industries can change the claim profiles over time.

ConclusionChanges in medical science, medical technology and the medical benefit definitions themselves can have a material impact on the claims experience of life insurers.

It is important to consider how developing treatments may change the profile of cancer prognosis and resulting experience – for example, breast cancer historically had lower survival rates, but with improving prognosis this cancer might increasingly be managed through trauma claims.

It is also important not to take emerging trends at face value, but to consider the drivers of experience –some trends may seem significant, but could be explained by better health screening or changes inthe risk profile of the business.

Understanding changes to claim patterns allows insurance companies to provide products that better meet evolving needs, such as by unlocking value to the policyholder to meet additional out-of-pocket expenses and eliminate any financial stress that may otherwise be associated with a trauma event.

References1. GBD 2013 DALYs and HALE Collaborators. Global, regional, and national disability-adjusted life

years (DALYs) for 306 diseases and injuries and healthy life expectancy (HALE) for 188 countries,1990–2013: quantifying the epidemiological transition. The Lancet, Volume 386, Issue 10009, 28November–4 December 2015, Pages 2145–2191

Joe HoftHead of Internal Audit, Asia Pacific

RGA Reinsurance Company

Yee Wing LiAudit Manager

RGA Reinsurance Company of Australia Limited

Understanding RGA’s Global AuditService

At RGA, the Global Audit team adds value by identifying and recommending positive changes to anorganisation’s business operations, which in turn produce better results. One of the activities performedthat relates specifically to clients is when the Global Audit team visits a client to review the administrationof the business in place in a client reinsurance audit.

When client companies are informed that RGA would like to perform a client audit, they may havequestions such as:

1. Is something wrong with our reinsured business?2. Have we performed our premiums or claims recovery calculations incorrectly?3. Have we not complied with our treaty arrangements?4. How much time will this take and how much will it cost?

RGA’s clients are valuable business partners. Because of the significance of our relationship, RGA worksto ensure that business is administered by us and all our partners according to the parameters set out inthe relevant treaties. Client reinsurance audits are conducted based on certain factors; often the rationalefor the audit is not because the client has performed something incorrectly, but more likely due to otherreasons, such as the amount of time since the last audit.

What is a client reinsurance audit?RGA started performing client reinsurance audits in the United States based on the 1984 American Institute of Certified Public Accountants Statement of Position (SOP) for auditing life reinsurance, which requires periodic audits of clients and affiliates. This SOP came into effect as a result of more and more companies taking over transaction activities, formerly performed by reinsurers, in order to get better rates on the business reinsured. This transition of transactional reporting being performed by the client companies is referred to as self-administration. To comply with the SOP, RGA Global Audit started to perform client reinsurance administration audits. In the early 2000s, RGA began performing these audits in other international locations, with Australia being one of the first of these.

Some of RGA’s reinsurance partners were uncertain about the rationale for and may have been resistant to the client audits at first. However, over the years, as our partners became aware of the value that this service afforded their business operations, the audits have become standard practice and expected. In the past few years RGA has extended these audits to underwriting and claims functions, where assurance reviews are also being performed at client companies. Client assurance reviews are performed with the help of RGA subject-matter experts (i.e., underwriters and claims specialists). The business selected for these audits and reviews is based on various factors, including volume of business, amount of new business, product mix, prior audit results, and administrative and reporting questions raised during periodic risk assessments of our business.

Underwriting reviews focus on business reinsured on an automatic basis, and include considerations related to strategic clients, low retention/high quota share blocks, and preferred and substandard programs. While claims review procedures are built into the day-to-day claims process, client claims reviews are selected based on the company’s previous experience or current exposure to unreported claims, non-compliant treaty expectations, and indications of inefficiencies in the client’s processing procedures.

The purpose of a client reinsurance audit is to review the client company’s system(s) and data to ensure that the business being ceded to RGA is in compliance with the treaties in place. These audits also provide RGA the ability to review data at the client office to ensure accuracy and completeness of the business being ceded to RGA. Auditors are able to observe the capabilities and limitations of various client processes and systems during these audits. In addition, the audits and reviews are opportunities to address known and unknown concerns regarding the client’s data being provided to RGA.

The end result of the audits is the identification and resolution of issues, which is mutually beneficial to RGA and our clients. The focus is on treaty compliance, regardless of the direction of any potential financial adjustments.

Benefits to clients and RGAThe RGA Global Audit team performs client reinsurance audits at no cost to the client other than the time of those involved while the auditors are onsite. Many of the staff involved have been in reinsurance for more than 10 years, and their overall experience in the life insurance industry provides them with a level of knowledge that brings benefits to both the client and RGA.

To obtain an accurate, independent and objective assessment of the business reinsured with RGA, a client company could spend thousands of dollars engaging external consultants. Having RGA undertake this service for free, therefore, is a valuable function for our clients. Because of this, many clients now consider reinsurance audits to be professional consultations, performed by experts in reinsurance, that benefit all parties involved.

The audit scope focuses on treaty compliance, data and information maintained by the client and RGA, and the client’s processing controls. Recommendations derived from these audits eventually raise the quality of the reinsurance records, thus benefiting all parties to the agreements in place. Experience has also shown that these audits increase the level of trust between the client and RGA, resulting in a better business partnership in the long run.

These audits provide senior executives in both organisations with an awareness of challenges, processing difficulties and other potential risks about which they might be unaware. In addition, the results of an audit often provide confidence in relation to the risk transfer management to RGA by evidencing that processes related to the business reinsured with RGA are well-managed, and that data and transactions related to the business are accurate and reported in a timely manner.

RGA’s Global Audit team has expertise in internal controls and has experience in varied lines of business, which can add value to clients through the provision of audits and reviews. We hope that you, too, when audited or reviewed next, will appreciate the value and professionalism that the Global Audit team provides.

If you have questions about client audits or reviews, or need more information, please contact your local RGA representative.

Lucy Hammerman, FIAA

Lucy has joined the valuation team in Sydney as a Valuation Actuary. Forthe past seven years, she has worked at an actuarial consulting firm inAustralia, where she gained experience in a number of areas, includingvaluation, capital, pricing and experience investigations. She qualified as anactuary in 2010.

Brett Frazer

Brett has joined RGA as a Premium Analyst in our Sydney team. He hasmore than 16 years of reinsurance experience working in the non-life area. Alocal resident, Brett has worked for a reinsurer and as a reinsurance broker.Brett has a broad range of experience in technical accounts, claims andmarine insurance broking.

New Appointments

Dan Dai

Dan has been appointed as a Pricing Analyst in the pricing team. Sherecently graduated from the University of New South Wales with abachelor’s degree in actuarial studies and is currently pursuing a master’sdegree in the same field. During her university studies, she participated ininvestment-linked life product projects. She has also attained industryexperience through several internships, including at a tax firm, a bank andan insurance company.

Andrew Korck

Andrew has joined RGA’s underwriting team as a Senior UnderwritingConsultant in the Sydney office. He has more than 27 years of experiencewith both life insurers and reinsurers in the South African, UK and Australianmarkets. He migrated to Australia in 2009 and worked in Perth until hisrecent move across the country. Andrew has had a broad range of rolesduring his insurance career, including in underwriting, telemarketing andsales.

Ashley Ibarburu

Ashley has joined RGA’s Business Development team as Event Coordinator.She manages client events, marketing and communications. Ashley hasmore than seven years of experience in marketing and events. In addition,she has completed post-graduate studies in business marketing atUniversity of Technology Sydney. Prior to joining RGA, Ashley worked forthe Royal Botanic Gardens and Domain Trust, where she managed privateand public events, including New Year’s Eve in the gardens.

Yujin Ge

Yujin has joined the valuation team as a Senior Valuation Analyst. She hasworked for life reinsurance and life insurance companies both locally andinternationally during her career. Prior to joining RGA, Yujin held positions ina variety of roles, including pricing, reserving, investment and clientmanagement.

© 2015 Reinsurance Company of Australia Limited. All rights reserved. While every effort is made to ensure the accuracy of the information presented in this newsletter, RGA Reinsurance Company of Australia Limited, its related entities and associates and their respective officers, employees and agents (RGA) make no representation or warranty as to the accuracy, reliability, completeness or currency of the information contained in this publication (including information that has been provided by third parties).

The views expressed herein do not necessarily represent the views of RGA.

RGA accepts no liability or responsibility for any loss or damage whatsoever suffered as a result of direct or indirect use or application of any of the information contained in this newsletter. Under no circumstances will RGA be liable for any incidental, special or consequential damages, including damages for loss of business or other profits arising in relation to the use of the information contained in this publication or for any statement made in this newsletter.

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