Behavioral Data for Predictive Coverage Products

Q: RGA carried out a global study to measure the potential financial impact of the COVID-19 pandemic. What did you find?

A: Thanks to our global support and our local experience we can say that regarding life insurance, we have noticed that, just as with the Spanish flu, COVID-19 will most likely have an impact on the life expectancy of an entire generation. This will couple with the number of deaths and the side effects of the virus among people who overcame the infection. The latter does impact individual life expectancy so we need to consider it.

Regarding health insurance, we have mixed findings depending on the region and the type of coverage of the user -always healthcare is local-. Hospital expenditure has a different impact on insurers depending on several factors such as hospital or deductible levels. What we have found more frequently are expenditures under the deductible level, which means expenses are covered by the user.

We have seen that in Mexico average costs for a COVID-19 case is around MX$480,000 (US$23,600), whereas the most expensive COVID-19 hospitalization case paid by the insurance industry was around MX$30 million (US$1.5 million). However, the impact of the overall costs of COVID, are more impacted by frequency rather by severity. In fact, the overall result in 2020 for the majority of health insurance companies in Mexico was positive.

For 2021, we expect a similar positive scenario but this will depend on how the vaccination campaigns unfold. On the other hand, last year’s postponed surgeries are expected to occur this year, which will level out insurance claims.

Q: What has been RGA’s financial strategy for a COVID-19 response?

A: As a life and health specialized reinsurer creativity and digitalization have been the core of our strategy. Technology has allowed business continuity and quick responses. Almost all health insurance companies are offering telemedicine consultations and digital interaction with users. RGA has been interested in improving our customers’ experience with our services through a digital offering and this has resulted in new product developments that involve digital tools. Users and insurance companies are both seeking innovative coverage plans that also involve technology to enable practical access and usability.

Q: RGA introduced in Latin America a new digital product for patients with a chronic disease. How has this product performed?

A: The product has been performing extraordinarily. While I am not the leader of this project, I can share that this recently launched model won RGA the Most Innovative Insurer Award. This is a global competition organized by an American company. The project also received a project award from RGA’s headquarters.

This model, created by RGA, builds an ecosystem for the user through ally companies. Strategic partners include insurance and tech company, laboratories, doctors and medical associations, such as the Mexican Society of Nutrition and Endocrinology. Beyond being an insurance product, this is an integral solution for patients with Type 2 diabetes to offer advice, nutritional plans, media guidance, medical appointments and support from different actors interacting on the same platform. If the patient were to present a severe complication, the product also offers insurance coverage. However, the target of this product is to nurture better habits and a culture of prevention. 

We are continuously investing in innovation to support the growth of the life and health insurance industries; the success of this product has encouraged RGA to expand it to other chronic diseases. We began with diabetes but we are also looking into other ailments where this model can be useful and to other countries where we are present to introduce its benefits.

Q: How will COVID-19 influence Mexico’s low insurance penetration rates?

A: This sine qua non event has increased the number of insured people. Even at a corporate level, employers have been resilient and continued with their insurance policies as part of their employee benefits packages. Mexico has a double pay system where people pay for public medical coverage and for their private medical attention, which is why the private insurance sector has a low penetration rate. Still, there are companies that do not provide additional medical insurance.

Insurance premiums have declined or remained stable so people can maintain their coverage without paying too much. Here is where we have identified opportunities to reinvent our coverage and offer products that people will pay for. Reduced premiums are less likely if the person uses their policy to the fullest. To date, health insurers offer comprehensive coverage and people use a small percentage of what they offer, while still paying for the complete service. It is becoming more logical to offer what the user wants and actually uses while still having enough coverage in case of an unexpected health event. An example would be having a product with a high deductible with lower premiums.

Mexico is slowly moving toward this reinvention of health insurance coverage. However, the full transition to a reinvented sector will be slow. Traditionally, the insurance industry is very conservative.

Q: How likely is it for tech companies such as Google or Microsoft to fill in the gaps in the traditional insurance sector?

A: Large tech companies collect behavioral and predictive data from their users’ preferences on a daily basis. This provides a clear panorama of what users want. These companies have already created solutions for Property and Casualty (damage claims). For instance, IoT solutions monitor properties or houses to reduce the risk of a robbery. They practically eradicate the risk as the user can be monitoring the property 24/7, which is very disruptive for traditional P&C insurance companies.

In the health sector, doctors can now monitor patients and have a complete read of their symptoms through patients’ smart watches. Traditional insurance companies are already partnering with this tech giants to use their information, while tech companies are creating solutions of their own. By having this type of monitoring you are also reducing the risks of cardiac failure, for instance. This will, of course, take a long time to develop. However, we are already seeing results from behavioral data collection.

The sector needs to consider predictive models. Based on mortality rates from previous years, actuaries were able to predict future mortality rates. Now, we have to migrate to a prospective methodology, where we need to predict based on the information we gather from people’s behavior. At RGA, we are moving toward predictive models using the data we have gathered throughout the years, while respecting the confidentiality of the information but taking advantage of the behaviors we have identified. Beyond being in the insurance and financial industry, we need to be part of the knowledge and information industry. This will be our stepping stone to develop more products.

Reinsurance Group of America (RGA) is among the world’s largest life and health reinsurance companies. With operations in 27 countries, it supports clients and partners with innovative approaches and customized (re)insurance solutions.