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Three post-pandemic trends health insurers must consider

Detloff Rump - Peak Re - blog April 2022

By Detloff Rump, Director, Head of Underwriting, Life & Health, Peak Re

13 April 2022

This guest blog was written by Detloff Rump, Director, Head of Underwriting, Life & Health at ICMIF Supporting Member Peak Re. Detloff participated in the ICMIF Webinar earlier this year,Outlook 2022: A year of recovery and transformation”.

To adapt to a post-pandemic world with rising economic and environmental uncertainty, health insurers must be ready for a variety of challenges already visible on the horizon.

Recently, two of my children, both healthy individuals in their 30s, tested positive for COVID and had to self-isolate. As their father, I was concerned for many days. Thankfully, my children demonstrated only mild symptoms and were able to complete a full recovery.

It was nevertheless a wake-up call and made it clear that no one should consider themselves safe. Even now, we must remain vigilant to the possible emergence of new variants especially if they are non-reactive to antibodies (resulting from vaccinations or previous infection).

The pandemic has upended lives and has been responsible for over six million deaths so far1. It has changed the world. To help the younger generation feel safer and secure about their future, those of us in the insurance industry will need to embrace an important role in the coming years.

Understand how COVID has affected the world

A critical question insurers need to consider is how a large number of unvaccinated individuals will affect the overall risk faced by populations.

For several reasons, a vaccination divide looks set to stay and the unvaccinated pose a much higher risk of hospitalisation and death.

Similarly, populations that bore the brunt of the pandemic have a considerable number of long COVID sufferers. Long COVID is a condition in which the effects of COVID-19 continue for weeks or months beyond the initial illness and may affect physical and mental wellbeing.

Finally, there is also the collateral damage.

Overburdened public health systems have been unable to carry out normal duties: many healthcare consumers, for example, have been unable to carry out annual health screening tests.

The disruption of normal health service could lead to worsening chronic health problems or even more troubling consequences such as the diagnosis of cancers at an advanced rather than early stages.

While the changing healthcare profile of populations will affect pricing, it also offers opportunities.

Health insurers can re-design products (for example, adding features that address specific healthcare needs highlighted by COVID) or modernise them by offering telehealth services to better meet the needs of a transformed world.

Address medical inflation

Medical inflation will be another key challenge facing medical insurers.

Even before the pandemic, we were living in inflationary times.

A recent report2 on medical rates by Aon, the American insurance and reinsurance broker, outlines that medical inflation has topped general inflation by more than 5% in recent years.

To survive in an environment of high medical inflation, insurers will need to bring down future costs by interacting with end-users. If policyholders are guided towards better lifestyles, the savings can be quite dramatic. Preventative measures, introduced or fostered by insurers, will help reduce costs.

Forward-thinking health insurers have already sought to increase health awareness working with third-party solution providers and have gotten policyholders to sign up for wellness programmes or offered free regular health check-ups. They have leveraged Internet of Things-based technological devices so that chronic disease patients are enabled to better monitor their health.

Prepare for the impact of changing weather patterns

It is not only the pandemic and high medical inflation that are challenging the insurance industry. If actions are not very quickly taken, climate change could have a devastating impact.

Rising temperatures due to climate change will transform the atmosphere, oceans, coastlines and living ecosystems. Climate change is expected to lead to the migration of warmer zones further north such that diseases not witnessed before become prevalent in unexpected places.

According to the Lancet Countdown3, a scientific collaboration between 35 institutions, climate suitability for disease transmission has increased for diseases like dengue, malaria and cholera.

If diseases like malaria become prevalent in places where the population has no natural (immune) protection, it will further complicate the health risk profile of populations.

Meanwhile, changing weather patterns could lead to an apocalyptic scenario: many countries in the world could struggle to get access to adequate water or food. It has been estimated4 two-thirds of the world’s population will be living in water-stressed areas by 2025.

All of this will occur alongside an increase in the number of large-scale natural disasters we are already familiar with.

Public-private partnerships will be key

The consequences of these external shocks will manifest themselves in loss of life, business interruption, job losses or a reduction in tax revenue; in particular, the impact will be catastrophic in the relatively uninsured parts of the world.

While my children may have recovered from COVID-19, I fear they or their children may have to face a lot more uncertainty in their lives due to changes in the environment and the economic landscape.

As members of the insurance industry, we can make a difference through our professional lives.

We need to look at our ecosystems and fulfil our environmental, social and governance-related commitments. It is paramount we help address protection gaps in the markets we operate in and do so in a resilient and sustainable manner.

Our industry must be open to getting involved in public-private partnerships to help address the global insurability challenge.

Strategic cooperation between various actors – insurers, reinsurers, academia, non-governmental institutions and governments – will be needed to ensure the world manages a growing level of underlying risks.

With innovative approaches and with persistence, we can deal with these complex problems.

If we fulfil the responsibilities of our generation, I am confident that we can at least ensure the negative impacts on our environment are kept to a minimum.

1 Global Covid-19 deaths surpass 6 million, CNN Health, 7 March, 2022

2 2022 Global Medical Trend Rates Report, Aon

3 The 2021 Report, Lancet Countdown

4 Water scarcity, World Wildlife Fund

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