Disability Insurance Taskforce: The hard part – making it happen

As Hoa Bui remarked, the journey of this Taskforce began nearly two years ago, when she mused to the then President Nicolette Rubinsztein that the Actuaries Institute should do something about the individual disability income insurance (IDII) market. Industry losses were mounting at an alarming rate and so were customer prices, and it was evident this important market was not sustainable for any stakeholder.

The idea of a Taskforce emerged, and through fortuitous timing Ian Laughlin was available to be chair. Ambitious plans were developed.

The Institute’s Council gave the Taskforce the licence it needed – a very broad one that sought to effect major change through objective and professional analysis, reason, influence and transparency, working across a very wide ecosystem that put the customer at the centre. This was not just about product; it was about averting a potential market failure and influencing significant change for the public benefit.

“[The work] fits well with the modern vision of the Actuaries Institute, that our purpose is to serve the community through the skills of our members, rather than just serving our members,” remarked Hoa. 

The engagement with stakeholders has been wide and effective. For example; 450 people attended a webinar on the DITF work at the 2020 All-Actuaries Virtual Summit, over 20 submissions were made to the DITF’s consultation documents issued in September 2020 – a process new to the Institute, many stakeholders were engaged in discussions with the Taskforce, including CEOs, CROs, the medical and legal professions, regulators, insurers, research houses, advisers and consumer bodies.

But success for the Taskforce relies on driving change, within and outside the profession. Notwithstanding the many discussions, webinars, the consultation process, and the publication of the final report and supporting tools[1], the DITF was only part way through the process of driving change.  Hoa and Ian explained that real and lasting change was the major remaining challenge, and their presentation was something of a call to action for the profession and others.

There are over 40 recommendations that need to be considered and actioned across all ecosystem participants.

In a poll run at both at the 2021 All-Actuaries Virtual Summit and a recent Financial Services Council conference, it is interesting that the audiences nominated behavioural and not technical factors as the great risk to sustainable reform; in both polls ‘irrational competition’ topped the list of risks by some way, with ‘management’ a clear second.

Ian expressed the view that this suggests boards will be critical to successful implementation. He said, “The success of what we’re trying to do is really heavily dependent on the boards, because if they understand what we’re trying to achieve and why, and they want much better outcomes from their companies, they can take a more objective position than CEOs”.

In addition, boards should and can take a long-term view, they can put overlays in place, such as targets for outcomes that are sustainable, and connect these to remuneration to drive implementation through the business.

Actuaries are central too to making change happen. Ian and Hoa reminded the profession that they are the people others look to for the benchmark price and reserves, before any commercial layers are applied, including the level of uncertainty around these estimates.

What is also important for actuaries is having confidence, taking a bigger picture view and communicating the implications of the assumptions and results effectively.  The panel encouraged actuaries to be brave and say what they actually think, rather than solving for what they think management want to hear. This will help make change happen.

As the chair of the session, Kate Lyons, noted, “You get more success by describing the whole context, the problem, but also having some solutions up your sleeve … it’s thinking it the whole way through and finding that solution-orientated approach that can be really successful”.

There are 12 recommendations involving either actuaries individually or the Actuaries Institute. Examples include improving practices around pricing for uncertainty and that an appropriate sustainability metric is developed to be published alongside the existing Product ratings.

On behalf of the Life Insurance Practice Committee, the Taskforce has developed an Information Note for setting assumptions and related technical matters and it is hoped that this will be upgraded to a Professional Standard in due course.

In time it is also hoped that the principles and tools developed by the DITF can be applied to Total and Permanent Disability (TPD) insurance and Trauma insurance.

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