1. SCOR Global Life Non-disclosure Survey Catherine Lyons HIS Dublin – 11th September 2014

2. Agenda Introduction Definition of non-disclosure
Consequences of non-disclosure
Background to the survey
SCOR survey findings
How many companies are monitoring non-disclosure
Non-disclosure rates in Ireland and UK
Most common conditions non-disclosed
Impact of non-disclosure
Best practice tips
Conclusion

3. Introduction What is the definition of non-disclosure?
For clarity, we define non-disclosure as any instance where a disclosure should have been made on the application form which would have changed the underwriting terms/decision.
Consequences of non-disclosure
Reduced number of rated cases – without additional premiums charged
Additional claims filtering into the experience – cases that should have been declined at outset
Pricing impact - Non-disclosure rate and process feeds into scoring criteria which feeds into pricing – every reinsurer will take this into account
Higher premiums for customers
More “declined claims” because of non-disclosure
Customers don’t have the coverage they thought they had
Increased claims costs for disputed claims
Reputational risks to companies because of disputed claims
What has the industry done to reduce non-disclosure?
SCOR’s best practice guide – update coming soon!!!!

4. Should we be concerned about non-disclosure?
We can deal with it as we find it!!!
Underwriting - We have the ability
to act on all non-disclosure that’s found through evidence received / monitoring / sampling
Claims - Ability to act on some of the non-disclosure found during the claims process
What about the rest of the portfolio?
Need to implement changes to improve the hidden non-disclosure and endeavour to identify it at outset.

5. SCOR Non-disclosure survey
SCOR carries out first industry wide non-disclosure survey of this type – why?
Focussing on process, definitions and methods that provide more clarity to the results
Also asked about the reporting, analysis and actions.
Based on Life & Serious Illness

6. Companies monitoring non-disclosure

7. Methods of non-disclosure checking
Post issue sampling
Issue PMAs on a random sample of clean (standard rate) cases after they have been issued
Discretionary/routine evidence
Logging non-disclosure on evidence received either due to disclosures made or sum assured
Targeted sampling
Issue PMAs on a targeted sample of clean (standard rate) cases after they have been issued – sample can be taken from:
Trends identified from other checking processes e.g. ages, sums assured, smokers.
MI analysis – looking for distributor outliers, e.g. high levels of standard rates cases, more non-smokers than would be expected, cases just below non-medical limits, etc. Feeds into distribution management to determine the overall quality of business received

8. Methods of monitoring in Ireland and the UK.

9. What do you see?

10. Headline results – how can we compare them?
3% from medical evidence 4.9% from POST
Innocent 1% negligent 12.2% Deliberate 0.7%
4.09% % Outside Tolerance
Random 19% (accumulative X few years)
Significant 2.58%
10.8%
Random <3%
Dis 1.4%
Life/CI 11.8%
Innocent 7% Negligent 9.4% Deliberate 2.8%
10% random
Random 4.5% 4%

11. Comparison of results – Ireland & UK
Comparisons
Rate
Tolerance
Type
SCOR adjusted rate
Comments
Company 1
19% 25
POST
Average over a number of years , so not adjusted as had been higher
Company 2
5.4%
 6.2%
Adjusted for waiving 25s
Company 3
10% 50
 13%
Adjusted for waiving 50s
Company 4
4.9%
5.6%
Company 5
4.1%
6.8%
 2.7% outside tolerance
Company 6
12.1%
13.9%
Company 7
Target/ post
10.5%
Adjusted down as targeted will be higher
Company 8
10.8%
 No adjustment required
Company 9 4%
  No adjustment required
Company 10
2.7%
Dis
5.1%
Adjusted for waiving 25s and Dis ,

12. Random post issue sampling - SCOR adjusted non-disclosure rates - Ireland & UK

13. Sample of 500 cases (€100k SA / €40 p/m)
The financial impact of finding non-disclosure through post issue sampling
Sample of 500 cases (€100k SA / €40 p/m)
10% non-disclosure rate = 50 cases
10 cases should have been declined
18 should have had an exclusion applied
22 should have been rated (average SI rating of +55%,€40 per month premium, in force 8 years) = €46,464 extra premium
Cost / benefit
Cost of 500 PMAs (€86 each) €43,000 + cost for underwriting resource / admin costs
Additional premiums: €46,464
Potential claim savings
Up to €1m on declined cases
Up to €1.8m on exclusions
Conservatively if just 1 of the declined / exclusions resulted in a claim – additional saving of €100,000
Additional benefits
Known non-disclosure rate
Data available for analysis and further actions
Reduced claims costs

14. Effect on experience? SI Assumed 5% non-disc 10% non-disc Mix Rate OR
75%
100%
70%
65%
Rated
15%
155%
18%
21%
Exclusion 5%
325% 6% 7%
Decline
Average
131%
137%
143%
5% non-disc % non-disc
This results in an increase in experience of
4.7%
9.4%

15. Companies with lowest levels

16. Top 10 Medical conditions non-disclosed - Ireland

17. Top conditions non-disclosed- Ireland v UK
1. Cardiovascular
1. Mental health
2. Mental health
2. Musculoskeletal
3. Outstanding investigations
3. BMI
4. Musculoskeletal
4. Alcohol
5= Alcohol
5. Cardiovascular
5= Hypertension
6. Smoking
7. Gastrointestinal
7. Hypertension
8. Gynaecological
8. Family history
9= Neurological
9= Respiratory
9= Outstanding investigations

18. Best practice tips Use all methods available to monitor non-disclosure
Different methods help to understand the rates and can focus attention on the areas where it matters most
Analyse data to determine the causes of non-disclosure
Any necessary changes to application form questions / warnings / reflexive questions / help text – particularly in the automated world
Identify areas for further targeted checks
Discuss with intermediaries – tell them what you’re doing, advise them what action will be taken, identify training needs and provide support.
A consistent approach from companies will encourage better behaviours and quality of business
Publish results to management, sales, reinsurers and intermediaries
Make non-disclosure monitoring part of BAU
Continue to monitor non-disclosure and invest the time and resource to continue to reduce it.

19. Conclusions Average non-disclosure rate in Ireland & UK is 10%
Additional 9.4% ‘worse’ lives in the experience
Ireland 11% and UK 9%
Wide variation of results between companies
Companies are performing more monitoring of all types
Most are performing post-issue sampling – need to ensure that the number are sufficient to provide credible results
More scope to get better use of discretionary evidence and more useful data
Non-disclosure is increasingly being used as an important element of ‘Distribution Management’ – feeding into the overall quality of business received
The results are being widely circulated to senior management - still some reluctance to share results or even make it known to intermediaries that companies are actually monitoring non-disclosure
A consistent approach will provide more clarity to sales and applicants
There is room for improving non-disclosure monitoring processes; identifying where non-disclosure is coming from and more importantly reducing the overall non-disclosure rate!!
This will help companies keep costs down and maintain premiums for customers
This will provide more certainty to customers that their claims will be paid if the insured event happens.

20. €€€€ Non disclosure costs us all money €€€€