Unum

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Unum
Medicine Its Impact on Protection Insurance

• Michael ODonnell
• Chief Medical Officer

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Whats the Chief Impact of Medicine?
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Incapacity Stabilising
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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

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What Has This Meant for Critical Illness?

• Many illnesses are less critical
• Declined claims
• TP an even more difficult definition
• Does it do what people expect and what is it for?
• New ABI definitions

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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

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Fields Of Research

• Genetics / cancer
• Screening
• Gene therapy
• Stem Cells
• Surgery
• Microsurgery
• Transplants

• Therapeutics
• Pharmacology
• Stem cell therapy
• Investigations
• Laboratory
• Radiography

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Is Screening Always Good For You?

• Blood Pressure
• Blood sugar
• Cervical cytology
• Mammography
• PSA
• X-rays
• Whole body scanning (CT/MRI)

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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

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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

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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).

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What Are Stem Cells?
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Microsurgery

• Most eye surgery uses microscopes
• Restoration of severed limbs since 1980s
• 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

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Laparoscopic Cholecystectomy (Simulation)
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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)

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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

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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

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Problems Ahead!

• Obesity
• Alcohol
• Antibiotic resistance
• Changes in disease pattern with climate change

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IP (1)
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Whats on the Horizon?

• Stricter test for incapacity benefit
• Better training for GPs
• 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

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The Challenge for Protection Insurers

• Develop products that people need
• Listen to customers
• Group
• Individual
• Brokers
• Is the Gold Standard product always the best?

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The Protection Review Conference
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Protection Review ConferenceInnovation what
innovation?
Roger Edwards , Product Director, Bright Grey
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So how innovative are we at the moment?
So how innovative are we at the moment?
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Spiral of price competition
Industry infra-structure geared to price only
Ambitious plans to grow market share
Short term need to meet targets beats long term
desire to innovate and be different
Prices fall further
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Protection markets
Critical Illness
Term
Income Protection
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Life cover for less than 26p per day
When it comes to protection are retailers
behaving like retailers?
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Will price continue to fall?
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Difficult to break out

• Prudential Flexible Protection Plan
• Same market
• Alternative to CI

• Virgin Cancer Plan
• New market?
• Alternative to CI

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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

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Is innovation taking too big a risk?

• Long term
• Strategy
• RD
• Innovation
• New product lines

• Short term
• Sales
• Profit/share price
• Tactics
• Safety in similarity

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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?

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To summarise the current environment

• Doing the same things
• To the same people
• With the same products
• Using the same processes

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So is it really possible to innovate?
So how innovative are we at the moment?
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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

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Evolution or revolution?
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Innovation
We couldnt do that because
Thats a daft idea..
The Reassurers wont let us do that.
My only concern is that..
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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

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What is a protection product?
a piece of paper to file away and forget about?
a promise to pay money when something horrible
happens?
peace of mind?
compensation for life changing events?
debt repayment?
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The traditional protection product

• Piece of paper
• Promise to pay after a horrible event
• Just money

product
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The problem

• Exciting
• Status - you can polish it
• Material goods
• Its an experience!

product
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Reality
product
comms
apply
claim

• piece of paper
• promise to pay after a horrible event
• just money

• experience

• perception

• experience

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Where to innovate
Innovation neednt be confined to the product
think about all the proposition touch points
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comms
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Communication

• Create a better perception
• Engage with the Government
• Education on school syllabus, free consumer
  guides
• Cultural influences

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Affordability
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Information overload

• Innovation on advice
• Navigate through the massive maze

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Dont understand it
TPD
PHI
LTA
SACIC
MER
GPR
PMI
PTD
IP
ACIC
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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
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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?

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apply
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Apply
1992 App

• 1992 application form
• 2 pages
• 2004 industry average
• 32 pages

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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?

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GP report

• Expensive
• VAT
• The Holy Grail is a replacement for the GP
  report
• or to do away with it all together

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Do we have the bottle to replace the GP report?
Is the industry obsessed by removing every
possible risk from writing risk products?
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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?

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product
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Consumer needs
Decreasing life Level life
Family income benefit on death Income protection
for occupational disability
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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?

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Lessons for the IP market?
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Wow!

• Benefits payable for full term or age 60
• Own occupation cover
• Tick box application no underwriting
• Everyone pays the same rate

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But..

• 3 year pre-existing conditions
• Stress, backache or nervous disorder.

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Longer term
Is the answer MPPI or IP-
Mortgage Brokers
Financial Advisers
MPPI
IP
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claim
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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.

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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

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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?

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Summary
product
comms
apply
claim

• piece of paper
• promise to pay after a horrible event
• just money

• experience

• perception

• experience

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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

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