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Group IP and CI – a market overview
John Ritchie LLB, FCII
Business Manager Munich Re UK Life Branch
2005 Healthcare Convention
Date
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Seminar name
26 April 2005
Page 2
Group IP and CI – a market overview
Agenda
• Market overview• Product and process differentiation• Essentials for success/survival – “informed capacity”• Market dynamics and impact on results – “commercial”• Operational competence is the foundation of good pricing
Date
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Seminar name
26 April 2005
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Group IP and CI – a market overview
Themes and challenges
• Good pricing, in itself, will not guarantee success*.• Are the pricing wizards involved enough in the key operational
aspects ?• Are our IP/CI products answering the question that is being
asked ?
Date
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Seminar name
26 April 2005
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Group IP and CI – a market overview
Market Overview
Fewer insurers in IP and CIDrivers for consolidation are complexScale, risk competence and strategic commitmentIntermediary concerns that there are too few players
Only the strong survive…
Date
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Seminar name
26 April 2005
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Group IP and CI – a market overview
Market health check
• Growth• Profitability• Future of CI
Date
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Seminar name
26 April 2005
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Group IP and CI – a market overview
Are we answering the employer’s question ?
Q. How can I manage the risk that employees’ health brings to my venture?
A. Transfer the cash flow impact of your promise to help in the event of chronic (IP) or sudden acute (GCI) incapacity
Do advisers want us to answer the broader question or stick to our knitting – ever cheaper generic cover.
Date
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Seminar name
26 April 2005
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Group IP and CI – a market overview
Are we answering the employer’s question ?
• Commoditised, generic insurance will always be under extreme price pressure
• Advisers will often signal that they are uncomfortable with service innovation from insurers
• Is continuing income to NRD a bad fit for many employers ?• What is the current psychological contract between employer
and employee ?
Date
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Seminar name
26 April 2005
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Group IP and CI – a market overview
Service possibilities
IP Core
Occupational health services
Stress audit
Appropriate, professional services at
claim - CI and IP
“Wellness” initiatives
Absence management services
Date
Page 9
Seminar name
26 April 2005
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Group IP and CI – a market overview
Make your business “stickier”
• IP and CI claims are Low frequency, High impact
• Not many chances to contact client/ purchaser
• Differentiating with services may improve retention
Date
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Seminar name
26 April 2005
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Group IP and CI – a market overview
What does informed capacity look like?
• Scale• Focus on business retention• Claims management excellence• Scheme underwriting process that is reliable,repeatable (not
high profile scheme underwriters)• Appropriate relationship management• Systems that enable CCDA
Date
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Seminar name
26 April 2005
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Group IP and CI – a market overview
Health warning
• Over-reliance on one area of competence is risky• Ranking competence also risky• Adopt a Balanced Scorecard and adjust weighting as
conditions change
Date
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Seminar name
26 April 2005
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Group IP and CI – a market overview
CCDA
Contracts Operating to contractContract formation process“On risk” process that enables disclosure
Cash Timing of cash collection important
Data Cash leads complete and timely data
Analysis Data enables ongoing profitability analysis and portfolio analysis
Date
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Seminar name
26 April 2005
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Group IP and CI – a market overview
What does uninformed capacity look like?
• Major advisers’ “insurer of the last resort” or “favourite underwriter”
• Sub-scale and prone to dashes for growth • Personality scheme underwriters• Greedy share of niche markets• Over-reliant on relationship management and“commercial”
decisions.
Date
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Seminar name
26 April 2005
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Group IP and CI – a market overview
Uninformed capacity
• “We’ve got to match the rate set by those eejits@quickand dirty ins.com”
• How much of your new business in 2004 was done on another insurer’s basis ?
Date
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Seminar name
26 April 2005
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Group IP and CI – a market overview
“Commercial”
• Clients will, quite rightly, relentlessly seek value• Best big advisers have a well developed purchasing method,
but insurers still organise as if they’re selling to them.• Relentless competition between advisers for high value clients
Can you segment your market and find a less crowded space?
Date
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Seminar name
26 April 2005
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Group IP and CI – a market overview
Commercial – the reality
• Drop key elements of your scheme basis• Concede on peak risk medical underwriting• Hesitate to press for outstanding data• Waive premiums due from previous years to retain scheme at
recost – “ the CFO did not budget for it “
Commercial =margin erosion
Date
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Seminar name
26 April 2005
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Group IP and CI – a market overview
Commercial - the alternative definition
• Ensure contract formation and wording is fit for purpose and clear to all parties.
• Expect to perform to contract.• Clearly communicate when cash is due and payable.• Measure performance on all aspects and strive to get better.• Stop paying for other’s operational failures.
Date
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Seminar name
26 April 2005
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Group IP and CI – a market overview
Operational Risk
Can the margins in Group IP and CI support the practice of sponsoring client and intermediary operational failures?
Date
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Seminar name
26 April 2005
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Group IP and CI – a market overview
Scheme promise, member admin,
disclosure obligation
Operational risk
Do the margins in Group IP and CI support the practice of sponsoring client and intermediary operational failures?
Advice, design,
insurer selection, scheme admin
Risk, plus insurance opsand administration
Morbidity risk
Operational risk pressure
Corporate insured
Adviser/ agent
Insurer
Reinsurer
Date
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Seminar name
26 April 2005
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Group IP and CI – a market overview
What does really informed capacity look like?
Base rates from real recent experience
Complete data
Operational Operational competencecompetence
Inform scheme underwriting adjustments
Date
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Seminar name
26 April 2005
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Group IP and CI – a market overview
Data mining is the key
Claims in payment dataQuotes data. We quote for whole market in two year cycle.
Date
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Seminar name
26 April 2005
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Group IP and CI – a market overview
Themes and challenges
• Good pricing, in itself, will not guarantee success.• Are the pricing wizards involved enough in the key operational
aspects ?• Are our IP/CI products answering the question that is being
asked ?
