Medicine Its Impact on Unum Protection Michael

Medicine & Its Impact on Unum Protection Michael O’Donnell Insurance Chief Medical Officer

What’s the Chief Impact of Medicine?

Incapacity Stabilising

Medical Innovations of the th Century 20 • • • 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)

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?

The Protection Review Conference www. protectionreview. co. uk

Protection Review Conference Innovation – what innovation? Roger Edwards , Product Director, Bright Grey

So how innovative are innovative we at the are weat the moment?

Spiral of price competition Ambitious plans to grow market share Prices fall further Industry infra-structure geared to price only Short term need to meet targets beats long term desire to innovate and be different

Protection markets Critical Illness Term Income Protection

Life cover for less than 26 p per day When it comes to protection are retailers behaving like retailers?

Will price continue to fall? 3% Better mortality Psuedo - preferred lives Tele-underwriting 20% Online transactions Offshore admin 12% Persistency initiatives Reassurance deals 65% Commission Expenses Risk Profit

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 Long term • Sales • Strategy • Profit/share price • R&D • Tactics • Innovation • Safety in similarity • 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 it really So ishow innovative to possible are we at the innovate? moment?

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 That’s a daft idea…. . My only concern is that…. . We couldn’t do that because…… The Reassurers won’t let us do 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? ap rom som ise to p eth ing ay m hor rible oney hap when pen s? of e p ac e aper to p iece of ap d forget away an file about? ? d in m n for life ensatio comp vents? nging e cha debt repayment?

The traditional protection product • Piece of paper product • 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 comms apply • perception • experience product • piece of paper • promise to pay after a horrible event • just money the customer product experience claim • experience

Where to innovate comms apply product Innovation needn’t be confined to the product – think about all the proposition touch points claim

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 TPD ME LTA I PR G PM R I IC C A S PH ACIC IP PTD

Perception “In the event that you procure on e item, as defined by the appropriate bo xed quantity and confirmed by the elec tronic point of sale supervisor, we will as sist you in the procurement of a seco nd item, as defined by the appropriate bo xed 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 i. Pod?

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

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

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 Decreasing life CI? ? Level life Income replacement Family income benefit on death Income protection for occupational disability

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 Is the answer MPPI+ or IP- Mortgage Brokers MPPI Financial Advisers IP

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 comms apply • perception • experience product • piece of paper • promise to pay after a horrible event • just money the customer product experience claim • experience

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