Session 74 PD, Disruption in the Financial Services Industry
Moderator:
Julianne A. Callaway, FSA, ACAS, MAAA
Presenters: Julianne A. Callaway, FSA, ACAS, MAAA
Christopher John Hessenius, FSA, CERA, MAAA Kyle A. Nobbe, FSA, MAAA
SOA Antitrust Disclaimer SOA Presentation Disclaimer
2018 SOA Life & Annuity SymposiumJULIANNE CALLAWAY, KYLE NOBBE, CHRIS HESSENIUSSession 74, Disruption in the Financial Services IndustryMay 8, 2018
SOCIETY OF ACTUARIESAntitrust Compliance Guidelines
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The United States antitrust laws aim to protect consumers by preserving the free economy and prohibiting anti-competitive business practices; they promote competition. There are both state and federal antitrust laws, although state antitrust laws closely follow federal law. The Sherman Act, is the primary U.S. antitrust law pertaining to association activities. The Sherman Act prohibits every contract, combination or conspiracy that places an unreasonable restraint on trade. There are, however, some activities that are illegal under all circumstances, such as price fixing, market allocation and collusive bidding.
There is no safe harbor under the antitrust law for professional association activities. Therefore, association meeting participants should refrain from discussing any activity that could potentially be construed as having an anti-competitive effect. Discussions relating to product or service pricing, market allocations, membership restrictions, product standardization or other conditions on trade could arguably be perceived as a restraint on trade and may expose the SOA and its members to antitrust enforcement procedures.
While participating in all SOA in person meetings, webinars, teleconferences or side discussions, you should avoid discussing competitively sensitive information with competitors and follow these guidelines:
• Do not discuss prices for services or products or anything else that might affect prices• Do not discuss what you or other entities plan to do in a particular geographic or product markets or with particular customers.• Do not speak on behalf of the SOA or any of its committees unless specifically authorized to do so.
• Do leave a meeting where any anticompetitive pricing or market allocation discussion occurs.• Do alert SOA staff and/or legal counsel to any concerning discussions• Do consult with legal counsel before raising any matter or making a statement that may involve competitively sensitive information.
Adherence to these guidelines involves not only avoidance of antitrust violations, but avoidance of behavior which might be so construed. These guidelines only provide an overview of prohibited activities. SOA legal counsel reviews meeting agenda and materials as deemed appropriate and any discussion that departs from the formal agenda should be scrutinized carefully. Antitrust compliance is everyone’s responsibility; however, please seek legal counsel if you have any questions or concerns.
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Presentation Disclaimer
Presentations are intended for educational purposes only and do not replace independent professional judgment. Statements of fact and opinions expressed are those of the participants individually and, unless expressly stated to the contrary, are not the opinion or position of the Society of Actuaries, its cosponsors or its committees. The Society of Actuaries does not endorse or approve, and assumes no responsibility for, the content, accuracy or completeness of the information presented. Attendees should note that the sessions are audio-recorded and may be published in various media, including print, audio and video formats without further notice.
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Introduction
Our Panel of Experts
• Julianne Callaway, Strategic Research Actuary, RGA• Kyle Nobbe, Associate Actuary, RGA• Chris Hessenius, Actuary, John Hancock
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AudienceThe 4th panelist – Let’s have a conversation!
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Type las.cnf.io In Your Browser
Find The Polls Feature Under MoreIn The Event App Choose your
session
Trends
Contributors to Disruption
Trends
• Demographics• Consumer Behavior• Employment
Financial Innovations
Barriers to Financial Responsibility
30% of U.S. households lack life insurance coverage
50% do not have enough protection to meet their needs
Understanding consumer concerns is key to filling the $12 trillion coverage gap
Personalized IntangibleComplicatedAntiquated Sales
Process Competing Priorities
Insurtech SolutionsFocus on improving customer experience and encouraging financial responsibility
Data Solutions
Savings Challenges
Planning Tools
Wellness Opportunities
Engagement, Education, Personalization
Data Solutions
Data is fueling disruption – The Balancing Act
Rewards
Personalized
Timely
Risks
Privacy
Proper-uses
Regulation
Discriminatory
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Privacy
Netflix’s crowdsource competition to improve movie recommendations University of Texas Research* Jane Doe v. Netflix**
*Source: http://www.cs.utexas.edu/~shmat/shmat_oak08netflix.pdf?utm_source=datafloq&utm_medium=ref&utm_campaign=datafloq
**Source: https://www.wired.com/2009/12/netflix-privacy-lawsuit/
Regulations
EU’s General Data Protection Regulation comes into effect May 2018
Fines up to 4% of global annual revenue
Key pieces of legislation: Scope, Consent, and Rights
Source: https://www.eugdpr.org/eugdpr.org.ht
Discrimination
Source: Weapons of Math Destruction by Cathy O’Neil
“The models being used today are opaque, unregulated, anduncontestable, even when they’re wrong. Most troubling, theyreinforce discrimination: If a poor student can’t get a loanbecause a lending model deems him too risky (by virtue of hiszip code), he’s then cut off from the kind of education thatcould pull him out of poverty, and the vicious spiral ensues”
- Foreword from Cathy O’Neil’s “Weapons of Math Destruction”
Case Study
Cross-selling model using Marketing Data
Confidential Data Management Plan (CDMP)This Confidential Data Management Plan is intended to function as a security manual to guide RGA Team Members in working with Confidential Data including
Intended Use Cases Agreements Data Classification Data Access Data Use and Storage Data Transfer and Sharing Data Retention and Destruction Team Member Onboarding and Offboarding Incidents and Responses Resources Team Member Acknowledgement
The CDMP sets the data usage rules for associates to protect
Marketing Data Overview
Attributes
Demographic data
Zip Code data
Survey data
Household data
Generated features
Key Considerations
Where the data comes from Self-reported Generated Measured
Data relationships
Cross Sell Model Process
Features selected for ModelingData determined by:1) Data expertise2) Business expertise
Final Features determined byModeling techniques
Final Features Demographic attributes Socioeconomic attributesFeature Selection Process
Cross Selling Case Study – Balance
Rewards
Very successful at predicting policyholders likely to buy insurance
Risks
Ignoring specific protected classes. Account for this:
1. Before modeling2. During modeling3. After modeling
Privacy concerns• e.g. Target
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Savings Challenges and Planning Tools
Why don’t people buy life insurance?
Source: LIMRA U.S. Household Trends — 2016, http://www.limra.com/research/abstracts/pdf/2016/160928-01.aspx
Survey says…
Money Issues1
Confusion2
Procrastination3
Competing Financial Priorities“How much do I need?”
Life Event
Spending influences saving
Debt Threatens Financial SecurityConsumers use income to pay debt
Saving Techniques
Understand costs
Future focus
“Found Money”
Self-service tools
Financial Wellness
Source: Competiscan
Student Loan Repayment Programs
Digital Planning ToolsGuidance and storage for overwhelmed consumers
Research Advice Digital Assets
Democratization of services
On-demand
Video and print
Education
Supports advisor
Benchmark –“People Like Me”
Friends and Family
Online financial accounts
Social media, email
Computers, phones
Tools for Advisors
Source: Competiscan
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Comprehensive secure life planning platform making life insurance tangibleFor Consumers
For Professionals
Storage SharingGuidance
Everplans can help grow business and empower agents in four critical ways:
A three pillar solution provides a holistic approach to life and legacy planning
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TOMORROW APP
Free Will and Trust Combined with mobile life insurance quote
• Focused on millennial consumers• Non-traditional families
• Financial needs assessment aligns with need for life insurance protection
• Digital repository for belongings and assets
Source: Competiscan
Wellness
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Life insurance ranks at the top of the list of things consumers know they probably should buy, but get no personal enjoyment from whatsoever. There's just no happy way to look at life insurance. In the best-case scenario, life insurance is just another bill to pay. And in the worst case, your family collects the benefits, but unfortunately you're dead.
Source: USA Today, Knowing when you need life insurance, September 19, 2013
””
What is Wellness?Originated in Health Insurance
Wellness Programs are designed to improve employee health through
weight loss plans, nutrition coaching and smoking cessation programs
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Employers provide Wellness Programs to promote more productive employees
with lower medical costs
Employees get discounts on health insurance premiums, gym membership and
earn reward points (in addition to living healthier)
Eating Healthy
Exercise Lower Stress
- Step trackers- Heart rate monitors
Exercise
- Nutrition trackers- Smart forks
Eating Healthy
- Sleep trackers- Stress/breathing trackers
Lower Stress
The world of health technology is accelerating so rapidly, it’s hard to keep up with the change!
Technology Enables Key Elements of Heath
Evolution of Behavioral-Based PremiumsWhat’s Next?
United StatesInitially Focused on Two Areas
Health Insurance: Most large employers and health insurers have implemented traditional wellness programs in an effort to reduce health care costs and reward consumers for healthy behaviors
Car Insurance: Telematics usage-based programs that reward safe drivers with lower premiums have been offered for years and are well accepted by customers
Life Insurance : A global wellness movement to incentivize changes for healthier lifestyles that will achieve healthier and longer lives for customers
1997 – South Africa2004 – United Kingdom 2013 – Singapore 2014 – Australia2016 – Continental Europe & Asia Expansion
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Can we expand Wellness Platforms across multiple Life Insurance carriers in the United States?
GloballyHigher Degree of Life Insurance Development
Behavioral-Based Premiums Make Sense for Life InsuranceLifestyle Behavior Impact On Mortality
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Smoking
Poor Nutrition
No Exercise
Diabetes Lung Disease
Cardiovascular Disease Cancer
50%
3 Lifestyle Choices account for
4 of the leading chronic lifestyle diseases
That lead to 50% of deaths*
1996Infectious diseases represent the world’s
leading cause of premature death
TodayLifestyle diseases represent the world’s leading
cause of premature death
LEADING CAUSES OF DEATH HAVE CHANGED
* 50% represents worldwide statistic, U.S. statistic is 55%, U.S. statistic based on ALL chronic diseases (not just four listed) is 70%
John Hancock Vitality –Fully Integrated Wellness Platform
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KNOW YOUR HEALTH
Enjoy Motivational Rewards
Based on Status
Travel
LeisureShop
Premium Savings
Achievea Status
Engage in Activities and Earn Points
Walking
Buying HealthyFood
Flu Shot
Non-smoker
Health Screenings
On-line Education
Gym Workout Platinum10,000 pts
Gold7,000 pts
Silver3,500 pts
Bronze0 pts
Determine Health Status and Set
Customized Goals
Age
ENJOY THE REWARDSIMPROVE YOUR HEALTH
Complete an Annual
Health Review
Current Customer Experience for Life InsuranceMinimal Engagement with Customer
Awareness Consideration DecisionMeets with
Financial AdvisorCompletes Application
Receives Policy and Pays Premium
Receives Privacy Notice from Carrier
Pays Year 2 Premium
Majority of interaction with carrier is either through financial advisor/agent during purchase process
Recognizes Need for Insurance
Introduce Wellness – A Whole New Customer JourneyFrequent, Positive Engagement
Awareness Consideration DecisionMeets with Financial
AdvisorCompletes Application
Receives Policy and Pays Premium
Pays Year 2 Premium
Interaction Occurs Throughout the Lifetime of the PolicyEnables the Carrier and the Customer to have a Stronger Relationship with the Client
Recognizes Need for Insurance
Registers for Wellness Program
Links Fitness Tracker Device
Earns Points for Going to Gym
Receive Email for Notification
of Points
Receive Points for Running 5k
Earn Higher Status
Premium is ReducedGift Cards Discounts on
Healthy Foods
Revolutionary Opportunity for Life InsuranceMore than Just Improving Mortality
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• Promoting long healthy life of customers
• Holistic marketing strategy
• Dynamic underwriting
• Broader market segments
• Ongoing relationship with customer
• Full integration with telematics
TomorrowToday
• Predicting the life span of customers
• Product strategy
• Point-in-time underwriting
• Focused market segment
• Infrequent engagement with customer
• No connectivity with telematics
Problems and OpportunityFintech potential to adapt to consumer needs and encourage financial responsibility
$12 Trillion Coverage Gap
$58 Billion Unclaimed
Assets
$3.8 Trillion Nonmortgage
Debt
70% Overweight
or Obese
