unum michael o’donnell chief medical officer medicine & its impact on protection insurance
Post on 19-Dec-2015
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Unum
Michael O’Donnell
Chief Medical Officer
Medicine & Its Impact on Protection Insurance
What’s the Chief Impact of Medicine?
Popluation by age in the UK (Females) 1901-2025
0
5
10
15
20
25
30
35
Under 16 16-24 25-34 35-44 45-54 55-64 65-74 75 and over All ages(=100%)(millions)
Agebands
Perc
en
1901 1931 1961 1991 2000 2011 2025
Popluation by age in the UK (Males) 1901-2025
0
5
10
15
20
25
30
35
40
Under 16 16-24 25-34 35-44 45-54 55-64 65-74 75 and over All ages(=100%)(millions)
Agebands
Perc
en
1901 1931 1961 1991 2000 2011 2025
Incapacity StabilisingIncapacity Benefits and Severe Disablement Allowance Recipients 1981-
2000
0
500
1,000
1,500
2,000
2,500
1981-82 1986-87 1991-92 1996-97 1998-99 1999-00
Year
No
of
Reci
pie
nts
Medical Innovations of the 20th Century• X Rays
• Radiotherapy
• Electrocardiograph
• Plastic surgery
• Antibiotics
• Antidepressants
• Drugs for hypertension
• Drugs for heart failure
• Open heart surgery
• Cervical cytology• Chemotherapy • Drugs for arthritis• Joint Replacements• Heart bypass surgery• Endoscopy• CT & MRI imaging• Cure for peptic ulcers• Microsurgery• Human Genome project
What Has This Meant for Critical Illness?• Many illnesses are less critical
– Declined claims– T&P an even more difficult definition– Does it do what people expect and what is it
for?
• New ABI definitions
Is Treatment Getting More Expensive?• Hysterectomy £4,500• Cataract & lens implant £2,500• Hip Replacement £8,500• But all much cheaper abroad• Herceptin £21,000• Avastin (bowel cancer) £2,400 pcm• ß-interferon (MS) £10,000 per year• NHS Lists falling and new doctors being
recruited from overseas - downward pressure on doctors’ pricing
Fields Of Research • Genetics /
cancer– Screening– Gene therapy– Stem Cells
• Surgery– Microsurgery– Transplants
• Therapeutics– Pharmacology
– Stem cell therapy
• Investigations– Laboratory
– Radiography
Is Screening Always Good For You?• Blood Pressure
• Blood sugar
• Cervical cytology
• Mammography
• PSA
• X-rays
• Whole body scanning (CT/MRI)
What Makes a Good Screening Test?• Simple
• Safe
• High sensitivity (no false reassurance)
• High Specificity (no false positives)
• Early detection of problem leads to prevention or effective treatment
• Medical tests for underwriting need to follow these rules
Gene Therapy
• Still in its infancy
• Very few success stories
• Difficult to insert genes (use a virus)
• Problems with immune reactions
• Problems with degradation of inserted genes
What Are Stem Cells?• Immature or undifferentiated cells.• Ability to become a number of different types of
mature cells.• The fertilized egg is the most immature and least
differentiated cell with the greatest potential.• Bone marrow cells are intermediate.• It is possible to persuade mature cells to revert
to being stem cells – but this needs caution (cancer).
What Are Stem Cells?
Microsurgery• Most eye surgery uses microscopes• Restoration of severed limbs since 1980’s• Laparoscopic surgery / arthroscopy• Use of remotely controlled mini-robots is just
starting– In May last year a heart valve was repaired using a
remotely controlled micro-robot
• Microsurgery has fewer complications– Smaller incisions– Shorter stays– Less time off work
Laparoscopic Cholecystectomy (Simulation)
Problems With Microsurgery
• Equipment expensive• Great skill needed to operate
– Slow and expensive to train staff– Recruitment difficulties
• Complications can be difficult to put right• All technologies get cheaper and easier
with time (except, perhaps medical ones for some reason)
Transplants• Cyclopsorin and tacrolimus have reduced
rejection rates• Kidney, heart, liver well established – islet cell
transplants may be a way forward for diabetes• Main problem is shortage of donors• Mechanical assist devices appear to let heart
recover from insults such as damage from viruses
• Best hope for future may be to regenerate new organs using stem cell technology
Pharmacology• Designer drugs
• Improved molecular biology– More rapid development of new drugs
– Better prediction of side effects
– Less need for animal experimentation
• HIV as an example
• MRSA as a warning
Problems Ahead!• Obesity
• Alcohol
• Antibiotic resistance
• Changes in disease pattern with climate change
IP (1)Incapacity Benefits and Severe Disablement Allowance Recipients 1981-
2000
0
500
1,000
1,500
2,000
2,500
1981-82 1986-87 1991-92 1996-97 1998-99 1999-00
Year
No
of
Reci
pie
nts
What’s on the Horizon?
• Stricter test for incapacity benefit• Better training for GP’s• Emphasis on occupational rehabilitation
– More onus on employers to rehabilitate– Fewer long term claimants– More opportunities for IP
• Development of more short term products– Cheaper– Simpler claims assessment– Good if combined with serious illness cover
The Challenge for Protection Insurers• Develop products that people need
• Listen to customers– Group– Individual– Brokers
• Is the Gold Standard product always the best?
www.protectionreview.co.uk
The Protection Review Conference
Protection Review Conference
Innovation – what innovation?
Roger Edwards , Product Director, Bright Grey
So how innovative
are we at the moment?
So how innovative are
we at the moment?
Spiral of price competition
Short term need to meet targets beats long term desire to innovate and be different
Prices fall further
Ambitious plans to grow market share
Industry infra-structure geared to price only
Protection markets
Income Protection
Critical Illness
Term
Life cover for less than 26p per day
When it comes to protection are retailers behaving like retailers?
Will price continue to fall?
12%
20%3%
65%
Commission Expenses Risk Profit
Better mortality
Psuedo - preferred lives
Tele-underwriting
Reassurance deals
Online transactions
Offshore admin
Persistency initiatives
Difficult to break out
Prudential Flexible Protection Plan
• Same market
• Alternative to CI
Virgin Cancer Plan
• New market?
• Alternative to CI
What advisers recommend?
Given regulation, advice justification, reasons why, threat of legal action
Existing CI• Cheap rates• Comfortable with cover• Proven concept• Millions paid in claims
Impact based CI• Higher rates• New definitions• Unproven concept• No claims history
Is innovation taking too big a risk?
Short term•Sales
•Profit/share price
•Tactics
•Safety in similarity
Long term•Strategy
•R&D
•Innovation
•New product lines
Difficult to break out
•Can you launch something new into the adviser channel and expect instant success?
•How many companies will take a long term view?
•More than one company launching something new might work – but what about the Competition Act?
To summarise the current environment
• Doing the same things
• To the same people
• With the same products
• Using the same processes
So how innovative
are we at the moment?
So is it really possible to innovate?
How to change the current environment
• Doing the same things• To the same people• With the same products• Using the same
processes
•Do different things•To people who are NOT currently customers•With different products•Using different
processes
Evolution or revolution?
Innovation
We couldn’t do that
because……
The Reassurers won’t let us do that….
That’s a daft idea…..
My only concern is
that…..
Innovation
• Are we designing products for consumers or our distribution channels?
• Bells and whistles that let our consultants get one up on the competition or benefits of real value to the consumer?
• Recent examples– silent heart attacks
What is a protection product?
a piece of paper to
file away and forget
about?
compensation for life
changing events?
a promise to pay money when
something horrible happens?
peace of mind?
debt repayment?
The traditional protection product
product•Piece of paper
•Promise to pay after a horrible event
•Just money
The problem
product•Exciting•Status - you can polish it
•Material goods
•It’s an experience!
Reality
productcomms apply claim
the customer product experience
•perception •experience •piece of paper•promise to
pay after a horrible event
•just money
•experience
Where to innovate
productcomms apply claim
Innovation needn’t be confined to the product – think about all the proposition touch points
comms
Communication
• Create a better perception• Engage with the Government
– Education: on school syllabus, free consumer guides– Cultural influences
Affordability
Information overload
•Innovation on advice
•Navigate through the massive maze
Don’t understand it
SACIC
TPD
ACIC
PMI
PTD
PHI
IPGPR
MER
LTA
Perception
“In the event that you procure one item, as defined by the appropriate boxed quantity and confirmed by the electronic point of sale supervisor, we will assist you in the procurement of a second item, as defined by the appropriate boxed quantity, for no charge, that is, no monetary transaction, as defined by an exchange of currency, would be needed”
“Buy one get one free”
Communication innovation
•What about 24 hour protection channel?
•What about advertising on DVDs?
•What about the flavour of the month boy/girl band promoting protection?
•Include a protection podcast on each new iPod?
apply
Apply
1992 App • 1992 application form– 2 pages
• 2004 industry average– 32 pages
Are we doing preferred lives?
• Even more intrusive questions
• Less people accepted at ordinary rates
• Preferred lives products through the back door
• Length of process leading to reduced mortgage protection sales?
GP report
•Expensive•VAT•The Holy Grail is a replacement for the GP report•…or to do away with it all
together
Do we have the bottle to replace the GP report?Is the industry
obsessed by removing every possible
risk from writing risk products?
Application innovation
• What about blood spots and saliva profiles?
• What about drop ins to Boots for medicals?
• What about microchips embedded into the back of the neck?
• What about full medical details on the new Government Identity Card?
product
Consumer needs
Debt repayment
Income replacement
Decreasing life
Level life
Family income benefit on death
Income protection for occupational disability
CI??
Innovative products
• What about IP - when are we going to fix it?
• Is evolution of CI restricted to illness definition nitpicking?
• What about hybrid products?
• What about ‘Impact Based Cover’?
• What about a replacement for TPD?
• What about protection in a box or on a smartcard?
Lessons for the IP market?
•Benefits payable for full term or age 60•Own occupation cover•Tick box application – no
underwriting•Everyone pays the same rate
Wow!
But…..
•3 year pre-existing conditions
•Stress, backache or nervous disorder.
Longer term
MPPI IP
Is the answer MPPI+ or IP-
Mortgage Brokers
Financial Advisers
claim
Claims
•Long-winded process – often a repeat of initial underwriting
•Private detectives
•Treating people like people, not policy numbers
•Clarity – “We are declining your claim because of caveat emptor and uberrima fides.”
More than money
•More than just a hand out– Helping Hand– Best Doctors– HCML
•Real valuable service to all customers and their families
•Money when needed and pro-active help
•“Best advice” benefit to the adviser
•Repositioning protection to be help first, money second
Claims innovation
• What about paying them (ha ha!)?• What about no financial underwriting at claim for IP?• What about immediately paying 5% of every critical
illness claim? Or cover their monthly outgoings until the decision is made?
Summary
productcomms apply
the customer product experience
•perception •experience •piece of paper•promise to
pay after a horrible event
•just money
•experience
claim
Summary
• Do different things– Not just price– Not just stealing existing market share
• To people who are NOT currently customers– Other markets– Other distributors
• With different products– New product models tailored to market niches– New propositions
• Using different processes– Simplified underwriting– Easy application