Claude Chèvre on global market trends in life & health (re)insurance

00:00:00: Replay by Hannover Re. Expert insights on life and health insurance.

00:00:08: Which transformations have taken place in the life and health insurance business?

00:00:19: What emerging trends are shaping the global landscape?

00:00:22: And which proactive measures will lead to future success?

00:00:25: This is Replay by Hannover Re. I'm your host Susanne Loomis

00:00:29: and today we'll talk to Claude Chèvre about global market trends in life and health.

00:00:33: This podcast is for general information only, no professional advice and a subject to change.

00:00:41: You can find the full disclaimer in our show notes.

00:00:44: Welcome to our podcast Claude.

00:00:46: Hi, Susanne.

00:00:47: Claude is a member of the executive board Life and Health here at Hannover Re

00:00:50: and with a career spanning almost three decades,

00:00:53: Claude has held leadership roles across our industry,

00:00:55: providing him with a comprehensive global understanding of the life and health insurance landscape.

00:01:00: So, tell us, how long have you actually been a member of the executive board with us?

00:01:05: You might not believe it, but it's for 13 years now.

00:01:08: I started on 01.11.2011 here at Hannover Re

00:01:11: and it's really the longest period I have ever been working for a company

00:01:15: and in a way it's not really surprising because I love this company.

00:01:18: I love this company for its uniqueness because it is, as we say, somewhat different

00:01:23: and this somewhat different, what do I mean by that?

00:01:25: It is really this unique combination of a company with the balance sheet

00:01:29: and the financial strength of a huge company that we combine with the mindset of a small company.

00:01:35: And this small company mindset, what I mean by that is we have very little politics,

00:01:39: we have a lot of entrepreneurship, we're very open-minded and very fast and quick in decision making.

00:01:45: Wow, that's a great testament to Hannover Re

00:01:47: and I can imagine you've seen many transformations during that time.

00:01:51: Does it ever slow down?

00:01:53: It doesn't, it doesn't because if it's slow down I wouldn't be here anymore.

00:01:56: I love these companies with a fast pace, you know, and that's what we're having here.

00:01:59: This fast pace, this allows for change and these changes they allow us to be innovative,

00:02:04: to come up with new products, new services, just to meet the evolving needs of our customers.

00:02:09: Okay, good. Since you like it fast-paced, we'll do fast.

00:02:12: Speed round, are you ready?

00:02:14: Yeah, go ahead.

00:02:15: Let's do it. Old-timers or race cars?

00:02:17: Race cars.

00:02:18: Marathon or sprint?

00:02:19: Marathon.

00:02:20: Tennis or golf?

00:02:21: Hmm, tennis.

00:02:22: Early bird or night owl?

00:02:24: Early bird.

00:02:25: Cake or cheese?

00:02:26: Cheese, of course cheese.

00:02:28: You're right, spoken like a true Swiss, which makes sense because you are originally from Switzerland.

00:02:33: Yes, I'm a Swiss, but I don't know if you know, but I'm also German now, so I have to double national.

00:02:38: I'm a Swiss, I'm European.

00:02:41: But I try to bring a bit of Swissness into this company, of course.

00:02:44: I invite some teams at home and I prepare them a real traditional Swiss cheese fondue with Swiss cheese and Swiss wine, of course.

00:02:53: And they love it.

00:02:54: And I do that, by the way, with my colleagues of the EB also.

00:02:56: Yeah, that does sound like a wonderful way to connect on a personal level.

00:02:59: Yeah, of course.

00:03:00: I mean, personal connections are super important to me.

00:03:02: For me, it is super important to know my colleagues more than just for what they're doing in their professions.

00:03:07: I usually call it my frolleagues.

00:03:09: You know, froleagues, this is this combination of friends and colleagues.

00:03:13: I think it's important to get to know the people a bit more than just what they're doing.

00:03:17: And what I usually do, for example, I go for a run with the guys.

00:03:20: You know, whenever we have a seminar, I invite people in the morning, you know, to join me for a jog, a jog, not a race.

00:03:26: Yeah, I always call it a jog and talk.

00:03:28: There are some people that do walks and talks and I do jogs and talks.

00:03:32: And it's just brilliant.

00:03:33: You know, last time we had this Life and Health Management Forum with 70 managers across the world.

00:03:38: We had between 15 and 20 people joining.

00:03:41: Wow.

00:03:42: Absolutely great.

00:03:43: So you connect with people, you chat and the whole day feels so much better afterwards after having gone for a run.

00:03:48: It's easy to see that building a solid foundation in that way also helps navigating potential changes in the insurance business context.

00:03:57: And one could probably say that change has always been part of the Life and Health re-insurance, just as change is part of life itself.

00:04:04: Are there any particular developments that stand out to you?

00:04:08: Of course, there are many developments that we observe in the past years and probably the most important development that we see, we re-insurance and our clients, the Life and Health insurers,

00:04:18: is the demographic shift with this rapidly aging population.

00:04:21: And the reason why the population is aging is really that on the one hand we have declining birth rates a little bit across the world.

00:04:28: And then on the other hand, we have an increasing life expectancy.

00:04:31: Is this specific to a certain region or is this a global trend?

00:04:35: And how do you see the life insurance industry adapting to meet those changes?

00:04:39: I wouldn't say it's specific to any region.

00:04:42: I think it's something which is really global and as people live longer, the need for things like long-term care, of course, is rising.

00:04:49: We need to address the consumer needs with products that combine the traditional life insurance benefits with long-term care riders or maybe even stand-alone long-term care insurance policies.

00:04:59: So let's jump in right here.

00:05:01: Can you provide some examples of specific product innovations that cater to the needs of an aging population?

00:05:08: Yes, there are many. I mean, I just mentioned LTC, long-term care.

00:05:11: But beside LTC, we have insurers who are starting to offer products such as the famous reverse mortgages that leverage home equity for retirement income, for example.

00:05:21: Then we see, of course, annuity products coming up and this goes from immediate annuities to deferred annuities.

00:05:27: We're providing everything and we see this really rising.

00:05:30: So in general, the living benefit products are covering a broader range of treatments rather than focusing on one single diagnosis.

00:05:37: Insurers frequently have to adapt their products and service offerings to cater these evolving consumer needs.

00:05:44: One thing which is important is inclusivity.

00:05:46: So it's really starting to be emphasized by our companies, by our insurance companies, because they start to provide coverages for individuals with health issues or even chronic conditions.

00:05:55: And also innovative services are, of course, starting up to come now, usually facilitated by specialized health service providers and other startups.

00:06:03: Let me maybe also mention that one.

00:06:05: There is also an increased focus on wellness and prevention.

00:06:07: The more and more we see that a healthy older population translates for our insurance clients to lower health care costs and, of course, also delayed payouts for them.

00:06:17: Therefore, life insurance companies, they start to incentivize healthy behaviors through wellness programs, including also some discounts for policyholders who maintain a healthy lifestyle.

00:06:28: And you mentioned innovative services.

00:06:31: And I want to address another trend that has impacted the insurance market, artificial intelligence.

00:06:37: How does Hannover Re Life and Health leverage new technologies like AI to enhance risk assessment and underwriting processes?

00:06:45: Yeah, leveraging new technologies to enhance risk assessment and underwriting processes is quite a broad development that we're seeing worldwide.

00:06:52: The integration of AI and data analytics is transforming the whole life insurance and reinsurance industry.

00:06:58: It enables, of course, more personalized and efficient services.

00:07:02: AI algorithms can predict customer needs and behaviors, which at the end leads to more accurate risk assessment and pricing.

00:07:09: Let me give you maybe an example, which is Vitality, the South African example that we all know.

00:07:13: Vitality, they have, for example, launched what they call a personalized health pathway, which is underpinned by big data, machine learning and artificial intelligence.

00:07:22: It helps the customers to plot individualized action plans to improve their health.

00:07:28: And these plans, they're then adapted to specific local market needs to provide precise and science-based recommended next best actions for improving our customers' health.

00:07:38: There are, of course, also numerous other processes that are leveraged by chatbots and virtual assistants in order to improve the customer service and the engagement in the insurance space.

00:07:48: We have seen market moves to incorporate and leverage AI, including generative AI, in the space of underwriting, with many underwriting manuals and systems,

00:07:58: which are being augmented with AI to increase the efficiency and the quality of the underwriting.

00:08:04: In the US, for example, we partnered with one of the world's most advanced medication safety organizations.

00:08:10: The goal is to offer its technology and services to our healthcare clients.

00:08:14: Their medication safety assessment platform, that's how they call it, analyzes drug-drug, drug gene and drug disease interactions in order to provide a risk assessment,

00:08:24: which is individualized down to the DNA of each single client.

00:08:28: And this provides the clients with an avenue to ensure safe and effective medication.

00:08:33: Because one thing which is important, what we need to know is that adverse drug events is one of the leading causes of mortality and morbidity in the US.

00:08:41: So, in other words, generally AI is at the forefront of technical trends.

00:08:46: However, is every technical trend AI-driven or are there other emerging technologies shaping the industry as well?

00:08:54: It's not just AI.

00:08:55: I mean, AI is a buzzword.

00:08:56: I mean, everybody talks about AI, but there are many, many other developments happening, of course, also on the technology side.

00:09:02: Let me give you a few examples.

00:09:04: In Australia, we're piloting the use of electronic health records with one of our most important clients there, which is, by the way, a first in Australia.

00:09:12: And for the client, it has the potential to transform their offering for their end consumers before the time being their offering has been based on non-medical evidence model.

00:09:21: And now we're getting into a medical evidence model, which is really transforming the whole process.

00:09:25: But it also has, of course, the potential really to transform the underwriting process across the retail advice space in Australia.

00:09:32: So it's a big pilot, a big project.

00:09:34: I'm quite positive about that.

00:09:36: This may be on Australia, but if I move further up north in Asia, I mean, also in Asia, you see digital health data and technological advancements, which are reshaping the underwriting practices.

00:09:46: Japan, for example, is using third-party digital health data.

00:09:50: the more and more in order to do the underwriting assessments.

00:09:53: Or India maybe, just as an example, India, they're using the risk scoring models

00:09:57: in which they incorporate also machine learning, of course, and big data,

00:10:00: all this to streamline underwriting assessments.

00:10:02: So that's all positive movements that we see across Asia.

00:10:06: I mean, across Asia, I would say digitalization is enhancing the customer experience

00:10:10: and is reducing the need for extensive medical and financial documentation.

00:10:14: Let me talk about the UK.

00:10:16: Also there we have seen a rise in the use of comparison tools,

00:10:19: so these comparators that we have there to help advisors assess the quality

00:10:23: of different insurance products.

00:10:25: Maybe just two examples, we have CI expert, we have protection guru and many, many others.

00:10:31: Of course, these comparators, they're leading to pros and cons.

00:10:34: On the one hand, it gives advisors, but also end consumers,

00:10:37: a really objective assessment about how a product compares from one company to the other,

00:10:42: which is really good.

00:10:43: For example, also to know assess the quality and the coverage of critical illness products,

00:10:47: typically in the UK, at the same time, of course, and this is more the con,

00:10:51: you know, it leads to something like the insurers playing the game.

00:10:55: You know, they try to score really highly on these platforms.

00:10:58: Absolutely.

00:10:58: And by playing this game, innovation is not really on top of their list, you know,

00:11:02: so they really try to do everything to score highly,

00:11:05: which is then, of course, limiting a little bit the innovation activities there in the UK.

00:11:10: I just heard you say critical illness in that context.

00:11:14: Do you see changes here as well and what do they look like?

00:11:17: Oh, yes, critical illness is a very important product for us,

00:11:20: the life insurance and the life re-insurers.

00:11:22: And I would say it's currently not undergoing a revolution, but I would say a re-evolution.

00:11:28: And it's really made it run by advancements in healthcare.

00:11:31: I mean, maybe a few examples on these advancements.

00:11:34: First of all, across the world, we see an increased number of what we would call digital

00:11:38: therapeutics like smartphone apps and wearable devices.

00:11:42: They provide direct treatment or even behavior modifications to the end consumers.

00:11:47: And definitely these apps going to influence CI products to incentivize healthy behaviors.

00:11:53: This is going to reduce the risk or maybe the severity of critical illnesses.

00:11:57: So that's definitely one part that we see.

00:11:59: We also see, of course, an increased number of individuals who are interested in their own

00:12:04: understanding of the genetics of their genetic predispositions to certain illnesses.

00:12:09: And this, of course, has allowed these end consumers to go for tailored critical illness

00:12:14: treatment plans, so-called targeted critical illness plans that we see and the reinsurance

00:12:19: on the insurance industry.

00:12:20: They need, of course, to come up with coverage for these kind of very specific targeted treatment

00:12:25: products on the CI side.

00:12:26: So also you will see definitely some developments on the product side.

00:12:30: And last but not least, I would say you see the less and less invasive methods for detecting

00:12:35: critical illnesses.

00:12:37: Like let's say liquid biopsies that analyze circulating tumor DNA in the blood, for example.

00:12:43: This will lead to quicker diagnosis and potentially earlier identification of later stage and

00:12:48: recurrent cancers.

00:12:49: So all these developments, there are many, many more.

00:12:51: They have a huge impact, of course, on the CI business of the future, definitely.

00:12:56: So essentially there is a lot of development that has to be considered.

00:13:01: And as we just heard, you have a great international team of experts available to share their

00:13:05: input specific to the regional requirements.

00:13:09: With that being said, I want to touch on how critical regulations are and if you foresee

00:13:15: any that can impact the operations and strategies of Hannover Re and its clients.

00:13:20: Yeah, regulations.

00:13:22: Regulations that do have a massive impact on our industry and obviously they vary by

00:13:26: region and country.

00:13:27: I mean, I have plenty of examples that I could mention here, but let me maybe start with

00:13:32: the UK.

00:13:33: In the UK you have this new legislation which is called the new consumer duty legislation

00:13:38: which requires companies to act to deliver good outcomes for retail customers.

00:13:43: While we as a reinsurer not in scope, we'll likely be indirectly influenced by insurers'

00:13:48: efforts to comply with these new legislations in terms of product development and underwriting

00:13:52: and claims process, for example.

00:13:54: So that's an example from the UK.

00:13:56: But if you look into Asia, there is the implementation of IFRS 17 coming.

00:13:59: I mean, there is also the implementation of economic solvency and capital regimes which

00:14:03: are just coming in these different countries in Asia and they're all expected to bring

00:14:08: transparency to insurers' finances and impact product development and pricing.

00:14:12: This will create and this is the good thing about legislative changes, often opportunities

00:14:17: for us as a reinsurer.

00:14:19: So reinsurers were typically offering solutions for capital efficiency such as mass labs covers,

00:14:24: maybe coinsurance, but also longevity swaps in order to address these new regulatory and

00:14:29: economic challenges.

00:14:30: So these regulatory changes they often present an opportunity for us.

00:14:34: So it's not all negative what we hear on that front.

00:14:36: You just have to find it.

00:14:38: Absolutely.

00:14:39: And let me maybe take Japan, if we talk about Asia, where we have seen much stricter regulations,

00:14:43: particularly concerning bank assurance.

00:14:46: And the aim there is to enhance transparency and to prevent misselling practices that we

00:14:51: have observed in the past year.

00:14:52: So that's a positive move in Japan, I would say.

00:14:55: And then maybe back to Australia, there we have the so-called retirement income covenant

00:15:01: which has been introduced also many years ago.

00:15:02: I think it was in 2022 by the superannuation industry.

00:15:06: And this what we call simply covenant, it requires trustees of superannuation entities

00:15:12: to develop a retirement income strategy with retirement income options.

00:15:17: And this is for us again a great opportunity because they're looking for longevity protection

00:15:21: and as you know, we at Hannover Re were leader in longevity, leader in the longevity space.

00:15:26: And in particular also in Australia, we have really very good business on the longevity

00:15:29: side.

00:15:30: So I see this again as a very positive development for ourselves.

00:15:33: And maybe one region I haven't talked about by the way so far is Latin America.

00:15:37: Even in Latin America we see a lot of regulatory changes.

00:15:40: They start to introduce what we call the right to be forgotten.

00:15:43: This is something that we know already from Europe.

00:15:45: I think it has been introduced in the UK, then it went to France and then to Spain and

00:15:49: to other countries.

00:15:50: We don't know exactly what the impact of this is going to be on our business, but we're

00:15:53: analyzing this and we will see later.

00:15:55: Well, that's a pretty great 360 degree assessment.

00:16:00: And what measures do you take to stay ahead of those changes in the regulatory landscape?

00:16:06: We take a lot of measures.

00:16:07: We try to proactively manage regulatory changes.

00:16:10: We try to of course minimize compliance risks.

00:16:13: And also we try to maintain a competitive edge in the industry, including the regulations.

00:16:18: Maybe a few examples of what we're doing.

00:16:20: One thing is that we maintain a dedicated team and design very clear responsibilities

00:16:24: to monitor regulatory developments continuously.

00:16:27: This includes tracking changes at local, regional, but also at international levels.

00:16:32: So that's one bit of course.

00:16:34: The other one which is very important in my opinion is that we develop relationships

00:16:37: with regulators.

00:16:39: We participate in industry groups or forums which help us to receive first of all early

00:16:43: warnings.

00:16:44: We know what's going on, what potential regulatory change is coming, but it provides us also

00:16:48: with opportunities to positively influence policy developments, which is very important

00:16:53: for us.

00:16:54: Then of course also we ensure that our employees, they're well informed.

00:16:57: That's always important.

00:16:58: In particular, our underwriters, they need to know what's going on in the regulatory

00:17:02: side, in their regions, in their countries.

00:17:04: And that's one thing that we're doing, regular updates, regular sessions with our employees

00:17:09: in order to know what's going on in the regulatory side.

00:17:12: And also, and this is probably also a very important part that we're doing, we're developing

00:17:17: flexible operational frameworks.

00:17:19: Why do we do that?

00:17:21: Because we want to be able to quickly adapt to meet any new regulatory requirements which

00:17:25: are coming.

00:17:26: So when we say flexible operational frameworks, this involves of course having scalable processes,

00:17:32: scalable systems, so that we can quickly change the way we behave if there is any kind of

00:17:36: regulatory change in any of the regions, any of the countries.

00:17:40: The way we behave with respect to regulations, this flexibility, this adaptability, this

00:17:45: speed of changing processes, changing systems, changing behavior.

00:17:49: Of course, this is what Hannover Re is about.

00:17:52: This is Hannover Re Life and Health.

00:17:53: We are trying to always be in a position that we can, let's say, execute our options that

00:17:59: we have.

00:18:00: Options for everything, not just for regulatory situations, but also options when client needs

00:18:05: something, when client needs something specific.

00:18:07: For whatever reason, we need to be able to react quickly, come up with a solution and

00:18:11: know it's something that we don't know at Hannover Re Life and Health.

00:18:14: It's never a no.

00:18:15: We always say, okay, let's have a look into it.

00:18:17: Let's see how we can modify our approach, how we can modify certain products, how we

00:18:21: can look into pricing.

00:18:23: And that's really what Hannover Re is.

00:18:24: Hannover Re is really trying to quickly adapt to the changing environment and landscape and

00:18:30: react and take benefits out of that.

00:18:33: Well that sums it up perfectly.

00:18:35: No additional words needed here.

00:18:37: So in today's episode, we talked about the dynamic landscape of the insurance industry.

00:18:42: We explored global trends from population aging to the integration of AI and highlighted

00:18:47: the importance of insurers offering innovative products to meet evolving needs.

00:18:52: Claude, thank you so much for joining us.

00:18:55: Thank you.

00:18:56: I enjoyed the conversation very much.

00:18:58: And thank you for listening to Replay by Hannover Re.

00:19:02: We hope you found this conversation helpful and don't forget to subscribe for more episodes.

00:19:07: Leave us a review if you enjoyed what you've heard and stay connected with Hannover Re on

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00:19:11: Until next time.

00:19:13: The thoughts, ideas, documents and other content discussed or shared in this podcast are not

00:19:28: intended to constitute any professional advice.

00:19:30: Hannover Re and the participants are not liable for any damages resulting from the usage of

00:19:35: the content of this podcast.

00:19:36: For further information, please see the show notes.

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