Importance of Underwriting in Product Development

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Importance of Underwriting in Product Development

• AFS event, Cirencester
• 4th March 2008
• Janet Cassettari, Re12 Ltd

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Content of Presentation

• Introduction to afternoon
• Re12
• Underwriting and Product Development
• Why underwrite/select ?
• The product development stakeholders and the
  impact of underwriting
• Case studies of underwriting in product
  development

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Introduction to the afternoon/Agenda

• Importance of Underwriting in Product Development
• Underwriting of Holloway
• Friendly Society Business Insurance
• Underwriting in Protection
• Towards an AFS Protection Committee
• QA and summing up
• Close at 16.00hrs

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Introduction to Re12

• Product development/reinsurance placement and
  deals with an emphasis on older age market e.g
  enhanced annuities
• Geographic focus-mainly UK
• Team of 3 with a range of skills in reinsurance,
  actuarial, marketing and product development.

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Why underwrite ?

• Underwriting different meanings for different
  products
• No selection or limited selection in the past has
  had bad results
• Key component in pricing
• Recessionary times may create a greater need
• Least need may lapse/not buy
• Limited underwriting may not necessarily mean
  happy customers.

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Product Development Stakeholders
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Product Development Stakeholders
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Case Studies

• Critical illness
• Annuities

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Critical illness- Life cycle

• 1986-1990
• Simple product (4-6 conditions)
• Dread disease
• Reinsurance led
• Modest aggregated SA
• Reviewable rates
• Fully underwritten

• 1991-1993
• Conditions covered increase
• CIC not DD
• Max SA increases/ aggregation disappears
• Relaxation of underwriting

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Critical illness-Life cycle

• 1994- 2002
• Standardised definitions
• Conditions race
• Max SA disappears
• Guaranteed rates
• Mortgage sales and further reduced underwriting
• Consumer awareness
• Windfall gains/anti-selection

• 2003 onwards
• Rate guarantee concerns
• Tightening of underwriting (application process,
  max SA,etc)
• Claims not paid concerns/data
• Some debates about the products future

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Annuities

• Up until 1995 largely a commodity market /limited
  underwriting (only very impaired)
• 1995- Stalwart (now LV) launch 1st enhanced
  smoker annuity
• Others follow lifestyle annuities
• Enhanced market now uses a range of selection
  from no underwriting for aggregate/simple
  application for smokers to individually medically
  underwritten for severely impaired lives.
• Result More accurately priced annuities
  available based on increased risk of death but
  longer term impact on aggregate?
• Will preferred (reverse of enhanced) take off
  fully in the protection market?

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