PRODUCT DEVELOPMENT SECTION 3 Chairperson’s Corner By Brock Robbins 4 Product Trends Around the World By Elena Tonkovski and Product Joshua Dobiac 8 SOA Section Research By Jim Filmore 10 Term Life Insurance Market Update ISSUE 110 • JUNE 2018 ISSUE By Susan J. Saip Matters! 14 Shared Value Insurance: Award Winning Innovation By Alan Pollard and Benny Rubin 18 Introducing the In- Force Management Subgroup Product Trends Around the World By Jennie McGinnis 20 Tax Reform Impacts on By Elena Tonkovski and Joshua Dobiac Life Insurance Pricing Page 4 and Profitability By Curt Clingerman, Paul Fedchak, Casey Malone, and Craig Reynolds 24 Predictive Modeling for Life Insurance: Ways Life Insurers Can Participate in the Business Analytics Revolution By Chris Stehno and Jim Guszcza Contributors: Mike Batty, Arun Tripathi, Alice Kroll, Cheng- sheng Peter Wu, David Moore, and Mitch Katcher 2018 SECTION Product LEADERSHIP Officers Brock Robbins, FSA, FCIA, MAAA, Chairperson Elena Tonkovski, FSA, Vice Chairperson Anthony Ferraro, FSA, MAAA, Secretary Matters! Nancy Brophy, FSA, FCIA, Treasurer Council Members Issue 110 • June 2018 Curtis Clingerman, FSA, MAAA Blake Hill, FSA, FCIA Published three times a year by the Leonard Mangini, FSA, MAAA Product Development Section of the Lindsay Meisinger, FSA, MAAA Society of Actuaries. Ben Wadsley, FSA, MAAA 475 N. Martingale Road, Suite 600 Schaumburg, Ill 60173- 2226 Newsletter Editors Phone: 847- 706- 3500 Fax: 847- 706- 3599 Simpa Baiye, FSA, MAAA www.soa.org [email protected] This newsletter is free to section Kurt Guske, FSA, MAAA members. Current issues are available [email protected] on the SOA website (www.soa.org). Blake Hill, FSA, FCIA To join the section, SOA members and [email protected] non- members can locate a member- ship form on the Product Development Lindsay Meisinger, FSA, MAAA Section Web page at www.soa.org [email protected] /productdevelopment. Program Committee Coordinators This publication is provided for informa- Paul Fedchak, FSA, MAAA tional and educational purposes only. Dean Kerr, FSA, ACIA, MAAA Neither the Society of Actuaries nor the Lindsay Meisinger, FSA, MAAA respective authors’ employers make any Donna Megregian, FSA, MAAA endorsement, representation or guar- 2018 Life & Annuity Symposium Coordinators antee with regard to any content, and disclaim any liability in connection with Leonard Mangini, FSA, MAAA the use or misuse of any information Donna Megregian, FSA, MAAA provided herein. This publication should 2018 SOA Annual Meeting & Exhibit Coordinators not be construed as professional or financial advice. Statements of fact and Research Leads opinions expressed herein are those of Jim Filmore, FSA, MAAA the individual authors and are not neces - [email protected] sarily those of the Society of Actuaries or the respective authors’ employers. Donna Megregian, FSA, MAAA [email protected] Copyright © 2018 Society of Actuaries. All rights reserved. SOA Staff James Miles, FSA, MAAA, Staff Partner Publication Schedule [email protected] Publication Month: October 2018 Articles Due: June 26, 2018 Jessica Boyke, Section Specialist [email protected] Julia Anderson Bauer, Publications Manager [email protected] Kathryn Baker, Staff Editor [email protected] Julissa Sweeney, Graphic Designer [email protected] 2 | JUNE 2018 PRODUCT MATTERS! Chairperson’s Corner By Brock Robbins ustomer engagement is a dominant theme within the life insurance industry today. To stay connected, some insurers are beginning to promote and reward healthy Cchoices through innovative product design. This is an exciting movement because it expands the life insur- ance value proposition from death benefits to include broader lifestyle benefits. Products that reward policyholders for healthy choices (captured on cell phones and wearable devices) are a path to sustainable customer engagement. Moreover, it presents an opportunity to influence attitudes and change behavior. Wellness and insurance is a win- win: Policyholders get healthier and life insurers get a better performing book of business. In this issue of Product Matters!, Jennie McGinnis updates sec- tion members on the new In- force Management Subgroup. I expect we’ll be hearing much more about this topic in the As always, many thanks to our contributing authors. We greatly months ahead. appreciate your time, efforts and expertise. We also feature several other timely and high- interest topics, We welcome feedback from readers as well as any suggestions including for future articles. ■ • Product Trends Around the World • SOA Section Research • Summary of Term Survey Brock Robbins, FSA, is deputy CEO of SCOR Global Life in the Americas. He can be reached at • Shared Value [email protected]. • Tax Reform on Life Pricing • Continuation of PM for Life Insurance JUNE 2018 PRODUCT MATTERS! | 3 privacy and data protection reveals a profound shift in Product Trends Around how insurance is not only sold, but managed. This pres- ents increased risk, to be sure, but insurers who take a the World forward- thinking attitude towards these opportunities will be able to get ahead of the market and define what By Elena Tonkovski and Joshua Dobiac insurance looks like in the future. Social: Population growth, lengthening life expectancies around the world, increasing employment, and shrinking family size are fundamentally redefining social dynamics. Thus, the needs of people at different points in their life cycle are changing. Products that may have made sense 017 was another year filled with innovation in the life 50 years ago (or even 20 years ago) may be poorly suited and health insurance industry around the globe. The to current requirements. Recognizing how social dynam- world around us keeps changing and changing F.A.S.T. ics are changing insurance needs will be instrumental for 2propelling companies to respond with F.R.E.S.H. solutions! growth and success in the near- and medium- term. The F.A.S.T. changes are: Technological: The world now has a population of over Financial: The world is more interconnected than ever 7 billion people, almost half of whom access the inter- before. While frictional challenges still exist in inter- net and utilize mobile phones regularly. 2.3 billion of national banking and insurance, the ease with which an them regularly use social media, mostly on their mobile individual can invest in foreign stocks, bonds, and curren- devices. Not only have the financial markets become cies has increased rapidly over the last 20 years. This has more interconnected, but so have people and businesses. created opportunities for insurers to explore more diverse Social media has extended well beyond just posting sel- hybrid investment/insurance offerings that provide more fies or giving likes; it has now integrated into sales and tailored solutions to potential policyholders. The success marketing platforms. Never before has there been such of many future products will be tied to how they leverage a low- cost, globally penetrating means to advertise and the greater connectedness in financial markets and how sell products and to receive near-instantaneous feedback. they link it with traditional insurance offerings. Customers’ buying habits and expectations are further fueled by smartphone applications, wearables, chat-bots, Authoritative: Solvency II, New GAAP, IFRS 17, new and more. U.S. Valuation Manual regulations, tax changes, and more are also bringing a whirlwind of change. Marrying So how should insurers respond? Here are some F.R.E.S.H. these regulatory changes to the growing concerns around product ideas companies have engaged in: Flexible: One of the most salient characteristics of gen- erational changes is the rejection of the one-size- fits- all model. Younger generations crave flexibility while those entering retirement are healthier than any prior genera- tion, allowing them to pursue a wide range of activities in their golden years. Insurers can help by providing more flexible options to increase cover, to allow for policy loans and to promote greater convertibility between products (such as going from term to permanent life). A menu-like approach to rider features to allow for changes across family members, across benefits, or across investment options, as well as the use of web tools for customizing coverage, are additional means to entice clients to pur- chase products tailored to their specific needs. Allianz1 in Italy is a great example of a very user- friendly custom- izable web tool that helps clients choose the amount and type of coverages they want from Allianz’s 13 individual 4 | JUNE 2018 PRODUCT MATTERS! building blocks from P&C, life and health insurance lines. covers or affordable microinsurance and bancassurance Premiums for all selected products are bundled into one channels. Companies now offer services beyond paying monthly payment. Another interesting example of flex- claims, such as rehabilitation; nutritional and psychologi- ible insurance is Sanlam’s Go Cover product offered in cal therapies; pre- screening benefits; doctor’s hotlines for South Africa. It is an on-demand type of micro- insurance consultation and more. Union Life in China, for exam- for accidental death that can be easily bought on your ple, has focused on the primary need of many retirees: phone for any length of time between 1 to 30 days. It’s having a place to live as long as they need through the especially useful for customers who are going on a trip, purchase of an annuity. Combining aspects of an annuity engaging in a hazardous sport, or who wish to provide with inflation protection and focusing on specific needs cover for their temporary employees. of retirees, Union Life is offering upscale apartments equipped with medical facilities, hospitals, recreational facilities and more. Sun Life in Malaysia is another [I]nsurers who take a forward- interesting example. They offer a Shariah-compliant pro- tection and savings product which also provides for your thinking attitude towards these religious needs by guaranteeing someone will perform opportunities will be able to get the Hajj on your behalf if you are physically or finan- cially unable to do so.