Products. Daniel Stone FASSA/FFA RGA Reinsurance Company of South Africa RGA Technical Seminar: Peering over our Borders June 2009

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1 Products Daniel Stone FASSA/FFA RGA Reinsurance Company of South Africa RGA Technical Seminar: Peering over our Borders June 2009 The security of experience. The power of innovation.

2 Agenda Introduction Factors affecting design Product themes Some innovative ideas 2

3 Product Development at RGA US & Canada High Net Worth Preferred Term Seniors Products MEXICO Critical Illness Hospital Cash Surgery Cash UK Substandard Annuity Wrap Protection Whole Life Product FRANCE & GERMANY Substandard Mortgage Protection Key Man Product Simplified Preferred Mortgage Protection Substandard Annuity Disability Income SPAIN & ITALY SI Cancer Stand Alone TPD Preferred Term Credit Life DM Term Life Utilities Protection CEE & RUSSIA Mortgage Protection Accidental Partial Disability Preferred Term CHINA Increasing Term Life Single Premium Par Endowment INDIA Preferred Term Deposit Continuation Accidental Hospital Cash Non-Medical Graded Term HONG KONG & TAIWAN GI Mortgage Protection GI Term Life Limited Pay CI SI Mortgage Protection Return of Premium Products (Death, Cancer, Hospital Cash) High Net Worth Preferred Term & Whole Life Mortgage Protection SOUTH KOREA Female CI Staged Cancer Preferred Term JAPAN Impaired Annuity Long-Term Level Term Life Preferred Life (Long-Term) SOUTH AFRICA Credit Life (Car Loans) Disability Income Individual Life (Full product offering) Cancer Product Funeral Cover AUSTRALIA & NZ Mortgage Protection Simplified Issue CI 3

4 Product Development Existing products cover most insured perils in some form Mortality Disability Critical Illness Unemployment Hospital stays Indemnity 4

5 What is covered? Mortality Health Disability Ability to Earn Accidental Death Critical Illness Short Term Disability Retrenchment Mortgage Protection Whole Life Preferred Term Hospital Indemnity Surgical Indemnity Rehabilitation Long Term Disability Total and Permanent Partial and Permanent Disability Income -Permanent - Temporary Premium payments Medical Reimbursement Total and Temporary Universal Life Dismemberment 5

6 Product Development Product development now more about upgrades and variations Can compare product development to 6

7 Car manufacturers 2009 model vs 2008 model Underlying mechanics still the same, but How they are put together changes HOWEVER 7

8 Over time 1900 s vs 2009 Significant difference! 8

9 Agenda Introduction Factors affecting design Product themes Some innovative ideas 9

10 Factors affecting design Regulation Legal framework Political environment Global environment Distribution methods Target markets Technological advances 10

11 Factors affecting design cont Demographics age, geographic location Public education levels Guarantee levels Cultural complexities Competition Market maturity 11

12 Factors affecting design cont Underwriting Medical advances Pandemics War, Terrorism ACTUARIES 12

13 Agenda Introduction Factors affecting design Product themes Commoditisation Culture Demographics Target market Some innovative ideas 13

14 Theme 1 - Commoditisation UK, US Standardised benefits Term Life, Critical Illness, Mortgage-linked Most common in Direct methods Website price comparison portals Features and premium rates are easily comparable 14

15 Commoditisation - Focus areas Efficiency of operations Price accuracy and dynamic prices Distribution and underwriting efficiency Underwriting levels pushed to limits and simplified Competitiveness Low margin but high volume 15

16 Effect of commoditisation % net written premiums % longterm funds Source: Overview of the UK insurance market during 2007 Association of British Insurers

17 Agenda Introduction Factors affecting design Product themes Commoditisation Culture Demographics Target market Some innovative ideas 17

18 Theme 2 - Culture Religion: Islamic Takaful products Political 1) State provides via State Insurance Company 2) High social provision = less perceived need for private insurance BUT, move away from socialism creates opportunity for private insurers 18

19 What is Takaful? The Islamic Fiqh Academy under the auspices of the Organization of Islamic Conference ruled in 1985 that: Insurance through the concept of a cooperative (which is founded on the basis of Tabarru and cooperation) is acceptable in Islam Basis of modern Islamic Insurance Insured is also the insurer Gharar is forgiven = contract based on mutual self help and cooperation 19

20 Takaful Operation Mutual/Cooperative Approach Premium is a donation to the cooperative pool The policyholders/owners of the operation hires the managers to run the operation Managers in return receive wages The policyholders takes: Expense risk Investment and liquidity risk Mortality and morbidity risk Operational risk 20

21 Takaful Operation Company/Cooperative Approach These functions are performed on behalf of the policy owners through appropriate Islamic contracts Premium is divided between Fee payable to the Company Tabarru into the risk pool 21

22 Agenda Introduction Factors affecting design Product themes Commoditisation Culture Demographics Target market Some innovative ideas 22

23 Theme 3 - Demographics Preferred substandard products Life products developed for specific market segments Target Segment: HIV+, Cancer, etc Substandard Life higher premiums Impaired Annuities higher annuity Underwriting full Risk Mitigation 23

24 HIV+ product - PruProtect 24

25 Agenda Introduction Factors affecting design Product themes Commoditisation Culture Demographics Target market Some innovative ideas 25

26 Theme 4 Target market Mass market Poland: PZU, largest insurer in Poland, sells voluntary coverage via worksite marketing Cheap, basic cover that is roughly 10/month of premiums Sum assureds are approx for base mortality benefit and rider SA about Covers the insured, spouse, child, and in some instances, grandparents or other family members Mass needs product similar to RSA funeral cover 26

27 Theme 4 Target market Middle market Outbound Tele-Life : Mexico Basic Life Protection Mexican Middle Market Underwriting - Simplified Issue Keys to success Targeted telecomms customers with simple life offer Tied relationship between insurance company and telecomm company Large customer base High take-up rates Premiums added to phone bill 27

28 Theme 4 Target market Priority Banking Market Size: There are about 300,000 people in Hong Kong with liquid assets of more than USD$150,000 This number is increasing every year Very attractive market segment Customers with large insurance needs Estate conservation, lifestyle protection Strong customer relationships allows for more focused needs based selling Specific needs-based products: preferred term life, critical illness, whole life medical 28

29 Priority Banking (example) HSBC Example Provide exclusive insurance privileges Priority underwriting - VIP outreach medical check-up service for life insurance if a medical examination is required Claims Services Dedicated HSBC Premier Insurance hotline Special discounts on selected life insurance plans 29

30 Theme 4 Target market Seniors market Worldwide the insured population age is increasing Longevity is increasing Products specifically designed and priced for seniors UK Over 50 s Spain Over 60 s US over 70 s 30

31 Seniors market (example) Tesco Over 50's Life Insurance Internet sales method Guaranteed acceptance if you are aged and a UK resident 2 year natural causes waiting period Premiums start from just 10 per month There's a FREE 20 Tesco Gift Card when you purchase a plan Your premium will never go up and your cover will never go down - regardless of the state of your health No medical required No complicated forms to fill in 31

32 Agenda Introduction Factors affecting design Product themes Some innovative ideas 32

33 Some innovative ideas Virgin Cancer Only Cover Deliberately covers cancer only Cheaper than full Critical Illness Pays 10%, 25% or 100% of sum assured Pays on more than ABI cancer Balance paid on death or Terminal Illness Sold directly to public - web and phone Communication aims to be clear Pays on more than ABI cancer Premiums are level but reviewable 33

34 Some innovative ideas Tesco Instant Sold in store like a birthday card Four question yes/no underwriting Questions shown on the display Fixed term and sum assured First premium paid with shopping Send in application to insurer This confirms the same questions Pay balance by direct debit 34

35 Differentiation by Efficiency The winner so far 35

36 RGA Product Development Complete assistance throughout the product development process Medical research Product design Actuarial resources Underwriting training Claims training 36