Session 74 PD, The Impact of Changing Demographics on Disability and Group Life Insurance. Moderator: Leo D. Tinkham, CEBS

Transcription

1 Session 74 PD, The Impact of Changing Demographics on Disability and Group Life Insurance Moderator: Leo D. Tinkham, CEBS Presenters: James Jacobsen Timothy B. Moran, ASA, MAAA Joseph M. Schauder, ASA, MAAA

2 2016 SOA Health Meeting James Jacobsen Millenial/Demograhpic Impacts to DI GSI Sales June 16, 2016

3 Millenials and Demographic Impacts to IDI GSI Marketing/enrollment 2

4 Agenda Basics of the GSI market Traditional Enrollment tactics What s the Reality Conclusion 3

5 The IDI GSI Market what is it Supplemental disability coverage to provide more complete coverage for executives. Can be either Employer or Employee pay Policies provided on a unisex, discounted and simplified issue (actively at work) Usually Non Cancellable and Guaranteed Renewable individual policies are used Major GSI Players: Unum, MassMutual, Guardian, MetLife (top carriers according to LIMRA) 4

6 Current Enrollment Best Practices campaigns, Employer communications Paper Enrollment Kits On-Line Enrollment System Group Meetings and one on one s Call Center handling both inbound and outbound calls Webex presentations Off cycle enrollment so not to compete with core benefit open enrollment 5

7 Today s reality- in GSI market Participation rates declining Large case results are the weakest Profit Challenge vol. vs. er pay, low interest rates, expenses Producer interest is increasing due to strong revenue stream associated with this line of business make up for lost revenue elsewhere Shift away from voluntary to employer pay Traditional markets Financial Services/ Dr s have significant penetration GSI amounts increasing Insurance Perceived as complex More difficult to get access/engage employees 6

8 Let s not forget.. Insurance is sold not bought 7

9 Actual Case Example - Financial Services Company Demographics: - over 1,000 eligibles - ave age 45 - ave. income $200k - Bonus/Incentive not covered by Group LTD Enrollment Method: Standard, including out bound calls Results: 20% participation 8

10 Actual Case Example - Software Company Demographics: - over 4,000 elgibles - ave age 36 - ave. income $120k - total comp not covered by the group LTD Enrollment Method: Conditions dictated by employer no group meetings or outbound calls Results: less than 6% participation 9

11 Millenial Attributes that impact employee benefits Millenials are viewed as more adaptable, creative and solo oriented Helicopter generation Benefits (specifically Health Ins.) are important Risk adverse 11 different jobs through working years 3 of 10 potentially in a entrepreneurial role Buying experience expectation is high Worklife balance, flexible work environment, progression, social responsibility are all important Once size does not fit all 10

12 What we (insurance companies) need to do Buying Preferences are different they don t know a world without digital technology Producers need to be our partners Employers need to give us access and help us engage employees Interested parties need to have interests aligned and rewarded (or not) for common purpose 11

13 Insurance companies need to invest, evolve and engage Invest in enrollment capabilities that recognize the uniqueness of the individual Invest in Product solutions that are simple and easy to understand Create an infrastructure and capabilities that allow for quick changes and adaptations to the every changing environment Engage broadly to make sure people understand the good this industry does for society and corporate responsibility. 12

14 TRENDS IN THE U.S. LABOR MARKET AND IMPLICATIONS FOR LTD Session 074 PD June 16, 2016 Tim Moran, 2 nd VP and Group Actuary

15 Agenda 1. High Level View 2. Demographics 3. Industry Dynamics 4. Effect on Group LTD Trends in the US Labor Market c 2016 Munich American Reassurance Company, all rights reserved 2

16 1 High Level View

17 Group LTD and the U.S. economy The good news GDP recovered from recession (2013 and 2014 GDP growth at 2.4%) Low unemployment Low inflation The bad news GDP growth has decreased in last two quarters ( 15 Q4 = 1.4%; 16 Q1 = 0.5% annual rates) Wages not rising; many new jobs are low wage service jobs Low interest rates Trends in the US Labor Market c 2016 Munich American Reassurance Company, all rights reserved 4

18 2 Demographics

19 Demography why it matters Pricing concerns Composite rating Rate guarantees Experience rating Renewing without census Claims management concerns Claimants are older Mortality and morbidity are improving Historical operational metrics have a shorter shelf life Trends in the US Labor Market c 2016 Munich American Reassurance Company, all rights reserved 6

20 Aging of the U.S. workforce Stable growth in average age over the past decade Average Age of U.S. Workforce Source: US Bureau of Labor Statistics Baby Boomers steeper Flatter recently Average aging 0.2 per year Male Female Trends in the US Labor Market c 2016 Munich American Reassurance Company, all rights reserved

21 Claim aging in 2008 SOA GLTD Experience Study 55 Average Age of Open Claims Source: 2008 SOA GLTD Experience Study Average Age of Open Claims Source: 2008 SOA GLTD Experience Study Male Female Cancer Other M&N Varies by diagnosis Hard to predict the implications Trends in the US Labor Market c 2016 Munich American Reassurance Company, all rights reserved 8

22 Age distribution of the U.S. workforce 30.0% 25.0% 20.0% 15.0% 10.0% Percentage of Workforce by Age Source: Bureau of Labor Statistics Workers under age 35 make up a lower % of the workforce Workers age 55+ now make up 22% of the workforce, compared to 14% in % 0.0% < Trends in the US Labor Market c 2016 Munich American Reassurance Company, all rights reserved 9

23 Age distribution of the U.S. workforce Number of People Aged 75+ Working in the US Source: Bureau of Labor Statistics 40% 35% 30% Baby Boomers moving through Changing attitudes and financial necessity % % % % 200 5% Men Women Growth since % Trends in the US Labor Market c 2016 Munich American Reassurance Company, all rights reserved 10

24 Age distribution of the U.S. workforce Workers 65 and over by Work Schedule, Percent of Total Source: Bureau of Labor Statistics Not just more, but more more people, longer hours Changing attitudes and financial necessity, but also healthier full-time part-time Trends in the US Labor Market c 2016 Munich American Reassurance Company, all rights reserved 11

25 Population mortality improvement Population mortality improvement steady at 1% per year for working ages Male Avg Mortality Improvement Compressed Mortality File Female Avg Mortality Improvement Compressed Mortality File 3% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% 1.3% Total % 2% 1% 1% 0% -1% -1% -2% -2% 0.9% Total Trends in the US Labor Market c 2016 Munich American Reassurance Company, all rights reserved 12

26 Mortality rates by attained age and duration Excluding cancer, M&N and pregnancy Mortality Rates by Attained Age and Duration Source: 2008 SOA GLTD Experience Study 500% 400% Mortality improvement happening faster in the 60+ category % 200% 100% Blocks will run off more slowly over time 0.0 Q1 Q2 Q3 Q4 Year 2 Year 3 Year 4 Year 5 Year 6+ < Recovery as % of % Trends in the US Labor Market c 2016 Munich American Reassurance Company, all rights reserved 13

27 Employment in the U.S. by Education Level (2005 to 2015) Average educational level continues to rise Shifting profile of the U.S. labor force s appetite for certain occupations Trends in the US Labor Market c 2016 Munich American Reassurance Company, all rights reserved 14

28 3 Labor Market Changes

29 Topics Doctors Finance Manufacturing Trends in the US Labor Market c 2016 Munich American Reassurance Company, all rights reserved 16

30 Labor Market for Doctors

31 Trends affecting doctors Shift to Medical Networks Before the ACA, consolidation began The ACA EHR costs and process Billing related to higher OOP costs Changes in reimbursements Outcome based fees Consumerism Higher OOP costs lead to shopping for best deal Internet fuelled rating of physicians Trends in the US Labor Market c 2016 Munich American Reassurance Company, all rights reserved

32 Distribution of Physicians by Practice Size (Source: AMA) 50% 45% 40% 35% 30% The times they ve been a changing Harder still to run a solo practice 25% 20% 15% 10% 5% 0% Trends in the US Labor Market c 2016 Munich American Reassurance Company, all rights reserved 19

33 Distribution of Physicians by Practice Size Physician Trends in Ownership and Hospital Employment (Source: AMA) Physicians working for a hospital or a practice with ownership by a hospital increased from 29.0% to 32.8% from 2012 to Solo Practice Physician Owners Physician Emplyed by Hospitals Physicians in Practices with at least some Hospital Ownership Trends in the US Labor Market c 2016 Munich American Reassurance Company, all rights reserved 20

34 Implications for Insuring Doctors Shift to Medical Networks and Hospitals Higher productivity expected The ACA Changing nature of doctor s jobs Changes in reimbursements Consumerism Shopping for best deal Patients question their doctors more Trends in the US Labor Market c 2016 Munich American Reassurance Company, all rights reserved

35 Labor Market in Finance Industries

36 Trends affecting the banking industry Regulation Separate investment from banking Capital standards Technology Online processing and mobile banking Chuck effect robo advisors Information availability Preferences Attitudes toward risk Trend toward index funds and ETF s Trends in the US Labor Market c 2016 Munich American Reassurance Company, all rights reserved 23

37 Distribution of occupations Number employed in finance industry since 2011 by occupation excluding insurance companies The occupations that are shrinking point to technology and consolidation Source: BKS Trends in the US Labor Market c 2016 Munich American Reassurance Company, all rights reserved 24

38 Manufacturing

39 Manufacturing trends Rate of change accelerating Nature of jobs changing Industries can shift in ever shorter periods of time Global competition Technology Automation Education level of the work force Job level of automation creeping into low level white collar Trends in the US Labor Market c 2016 Munich American Reassurance Company, all rights reserved

40 Distribution of employees by industry within manufacturing Growth in total since 2011 Data indicates which industries are most negatively affected Source: BKS Trends in the US Labor Market c 2016 Munich American Reassurance Company, all rights reserved 27

41 4 Effects on Group LTD

42 Conclusion The demography of the labor force is changing Industries evolving in response to changes in technology & legislation Incidence and termination rates change with job markets change Changes can happen rapidly and historical data has a shorter shelf life Need to be able to respond quickly to changing needs of employees and employers Trends in the US Labor Market c 2016 Munich American Reassurance Company, all rights reserved 29

43 Thank you!

44 2016 SOA Health Meeting Joseph Schauder, ASA, MAAA Effect of Demographic Changes on Group Life Pricing June 16, 2016

45 Effect of Demographic Changes on Group Life Pricing 2

46 U.S. Workforce Aging Has Flattened out in Recent Years Baby Boomers reaching Retirement Age 3

47 U.S. Workforce Aging Not Much Variation Within Industry Categories 4

48 U.S. Workforce Aging Only Slight Increases Projected to

49 Mortality Improvement Aside from 2010, has Converged Toward 0% in Recent Years Slight Increase in Death Rates from 2012 to

50 Base Claim Cost Tables If setting Base Claim Cost Tables based on Actual-to- Expected studies, only minor adjustments needed to be applied to historical data to normalize for Aging and Mortality Improvement Appropriate Prospective Adjustments seem to be Minimal at this point also 7

51 Case Level Pricing Adjustments Although the need to account for demographic changes in Base Claim Cost Tables would seem to be minimal, changes at the case level can be significant and can vary greatly from case-to-case Rebound from Recession Technology Advances Job profile changes M&A Activity Downsizing Offshoring of Resources 8

52 Case Level Pricing Adjustments Understanding trends in industry and company standing within industry is important Company financials and current events Comparing current census demographics to demographics from prior quotes or renewals For cases with credible experience, determine appropriate demographic adjustments o Aging, M/F distribution changes, salary changes not in line with inflation 9

53 Covered Retiree Class Impacts Aging of ER-Paid Retiree classes much greater than active classes and portion of claim costs often significant No Turnover (only entry and death) Much steeper Claim Cost Curves 10

54 Covered Retiree Class Impacts Mortality Improvement only about 1% better than for active ages in recent years 11

55 Retiree Class Aging New Retiree Class with 50/50 M/F split and normal retirement age of 65 has a 2-year aging load of about 1.16 using expected death rates from the 2013 SOA Group Term Life Experience Study 1.14 for all-male group 1.18 for all-female group Loads will vary by NRA 12

56 Retiree Class Aging Assuming level new retiree exposure each year, these would be the approximate 2-year aging loads for developed retiree classes at each of the following durations (50/50 M/F split, 65 NRA, SOA 2013 Death Rates) 10 years: years: years: years: 1.00 Aging loads will converge toward 1.00 as aggregate death rates become great enough to reach steady state relative to new retiree exposure 13

57 Retiree Class Aging If that same Retiree Class becomes closed to future retirees at each of the following durations, 2-year aging loads increase significantly 10 years: years: years: years: 1.10 Closed class aging loads will never get much further below 1.10 has exposure evolves if new retiree exposure was consistent year-over-year while the class was open 14

58 Retiree Class Aging If Benefit Plan Design is tightened at those durations instead of closed, the increase in aging loads is not as significant. These would be approximate 2-year aging loads if benefits were cut in half for future retirees at each of the following durations: 10 years: years: years: years: 1.05 As exposure evolves in these situations, aging loads will tend to become negative (discounts) prior to converging back toward

59 Retiree Class Aging If Benefit Plan Design is enriched at those durations, the appropriate aging loads would decrease and could even become negative (aging discount). These would be approximate 2-year aging loads if benefits were doubled for future retirees at each of the following durations: 10 years: years: years: years: 0.93 As exposure evolves in these situations, aging loads will initially increase in the years immediately after the increase in benefits before converging back toward

60 Evaluation of Retiree Class If history of retiree class is explained as part of the quote submission or can be determined from the census data, create separate rating classes of closed and open retirees by benefit plan design Aging loads for closed classes are more easily developed since you don t have to estimate the impact of new retiree exposure Closed Retiree classes put downward pressure on aggregate aging loads (active and retiree exposure combined) as retiree portion of total exposure declines 17

61 Key Indicators of Retiree Class If average age weighted by volume is greater than average age by count, benefit plan design was tightened at some point. If average age weighted by volume is less, benefit plan design was enriched at some point. Aging loads for retiree class with decrease in plan amounts should be adjusted upward relative to what would normally be calculated based on average age Aging loads for retiree class with increase in plan amounts should be adjusted downward relative to what would normally be calculated based on average age Average age of retiree class greater than 75 would suggest at least partially closed class Retiree Aging Load should be adjusted upward relative to what would normally be calculated based on average age 18

62 Key Indicators of Retiree Class For cases with experience, decreases in year-over-year lives would suggest at least partially closed class Aging loads should be adjusted upward Decreases in year-over-year volume would suggest either at least partially closed class or tightening of plan design at some point Volume reduction in line with Lives reduction partially closed class Volume reduction greater than Lives reduction tightening of plan design If normal retirement age is trending toward older ages, aging loads should be adjusted upward; if normal retirement age is trending toward younger ages, aging loads should be adjusted downward 19

63 Important Rating Considerations Retiree Aging Loads should be developed based on carrier s claim cost table Critical that rate slope by age-band is appropriate across all retiree ages Is enough internal data available and can it be broken down appropriately? Retiree rates at advanced ages should probably be different than Active rates at advanced ages Aging methodologies should differ between active exposure, open retiree exposure, and closed retiree exposure Retrospective aging adjustments applied to credible experience 20

64 How to Minimize Aging Loads in Pricing Shorter Experience Sets used in Experience Rating Shorter Rate Guarantees Benefit Reduction Schedules for Retirees Age-Banded Step Rates for ER-Paid Retiree Coverage 21