Exploring a more inclusive approach to insurance coverage

Exploring a more inclusive approach to insurance coverage

The pandemic is encouraging more people to ask themselves whether they should have life insurance. But what if a manageable health condition means you are written off by insurers? Aegon is exploring a fairer, digital-led approach to assessing risks and setting pricing for coverage that also has the potential to significantly improve processing times across all our life insurance products.

Albert Einstein's genius was built on a foundation of curiosity. A sound piece of advice he gave in 1955, is often quoted: "The important thing is not to stop questioning. Curiosity has its own reason for existence". Indeed, questioning and curiosity are responsible for almost all progress in every aspect of society.

Underwriting evolution

Insurance is no exception. Insurance providers such as Aegon use questions to gather information that enable us to 'underwrite' risk. This means assigning customers to pre-defined risk classes, which are used to decide whether the risk of providing coverage is acceptable and what price should be charged.

Underwriting traces its roots back to the 17th century and for many years the process remained largely unchanged. Except that the number of potential questions has grown significantly as insurance coverage has become the norm and society has become more complex.

A standard insurance form may consist of 50+ questions, with a potential for many follow-up questions for individuals, whose personal or health circumstances deviate from the established norm. While Einstein might cheer at this celebration of curiosity, customers and agents who have to complete the forms, and the underwriters who must assess them do not.

A year into the COVID-19 pandemic, eligibility for coverage is becoming a very urgent issue. A recent survey in the US found that more than half of consumers have talked to a loved one about life insurance, 13% were convinced to research their options for the first time and 1 in 10 purchasing a life insurance policy for the first time. A substantial portion of this increased demand is going the digital route underscoring the need for any insurer to be able to offer this in a simple, fair, and transparent manner.

Digital possibilities

Fortunately, the insurance industry has in recent years being undergoing major shifts in how it assesses, and prices risk. One key driver for change the increasing digitalization of society. For both international insurers like Aegon and lean online start-ups, this opens up the possibility of asking fewer questions of customers, while tapping into the huge amount of anonymous and statistical historical data available about almost every aspect of daily life.  

Obviously, this benefits the insurance provider. It allows us to work more efficiently, cutting the costs and time to sell tailor-made policies to our customers. It also supports the second major trend in the industry, making insurance coverage more widely and more easily accessible in society, including to groups previously marginalized or excluded from coverage because of existing health conditions.

This trend is driven by the fact that digital evaluation is capable of properly offsetting risks. In other words, while for example diabetes type II increases all-cause mortality risk, this can be significantly offset by regular exercise and a normal range body mass index (BMI). A digital process can properly evaluate this while a traditional underwriting process cannot.

Transamerica's application for intermediaries, incorporating Q2Q questions

Transamerica's application for intermediaries, incorporating Q2Q questions

Q2Q pilot

Aegon's purpose is to help people achieve a lifetime of financial security. We strive to integrate this social purpose into our products and services. This includes offering tailored solutions to vulnerable customers. For instance, we are exploring a faster, more efficient, and fairer approach to underwriting through our Qualitative to Quantitative (Q2Q) pilot.

Q2Q involves moving an applicant from a set of approximately 15 questions, revolving around medical risk, to a resulting rate-class that both stratifies that risk and determines pricing, without the need for fluids samples or laboratory tests.

We believe Q2Q represents a significant step forward for the insurance industry and provides Aegon with a significant competitive advantage. While increasing consistency and fairness, early results also suggest improved customer acceptance rates, lower lapse rates and processing times reduced by 95+%.

As part of our Q2Q underwriting pilot in Transamerica (Aegon's US business), we have launched a state-of-the-art electronic application for our intermediaries which ensures that nearly all submissions are in good order and therefore enables agent-friendly and customer-friendly instant decision making for the vast majority of applications. This is now being extended to all life products through the Transamerica Life Modernization program – a significant and ambitious undertaking in the US market.

"A clear advantage of our quantitative approach is that it can be applied 100% consistently without being subject to potential human bias – and while reflecting both plusses and minuses."

Quote Chris Madsen
Chris Madsen, Head of Transamerica Life Modernization

Insurance equality in action

A clear advantage of our quantitative approach is that it can be applied 100% consistently without being subject to potential human bias – and while reflecting both plusses and minuses," says Chris Madsen, Head of Transamerica Life Modernization.

"We can test this thanks to a systematic method Aegon has developed to prevent potential cases of so-called 'disparate impacts'. That's not to say it is always that simple, but through our developments, we can significantly improve the experience for our customers and agents, whether they are ultimately processed automatically or subject to further review."

Our approach involves combining approaches to triangulate evidence that disparate impacts are occurring. This offers insights into potential areas of issue while protecting the integrity of an individual’s data.

Looking beyond the US market, our WinSocial program, run by our joint venture MAG Aegon in Brazil, offers insurance to people with diabetes. The initiative, which forms part of our Q2Q pilot program, uses a mobile app and website to ask customers health and lifestyle questions before validating their responses via heart and glucose monitoring.

About 0.4% of Brazil’s population is living with HIV and AIDS. While these individuals are often considered uninsurable, HIV can often be controlled, making it a manageable chronic condition. Aegon research indicates that, as in the case of other chronic conditions such as diabetes mellitus, people living with HIV can be insurable if they can give evidence of sufficient control over their condition.

We hope to broaden this initiative in Brazil to cover other formerly uninsurable groups, including individuals with hypertension, HIV, and certain cancers.