CIA (e)Bulletin/(e)Bulletin de l'ICA

Canadian Institute of Actuaries

Elliott Bauer
Elliott Bauer
President's Update

By Michel St-Germain, FCIA
President of the CIA

The actuarial community encompasses professionals with shared skills and interests, a commonality that undoubtedly helps us become better actuaries. But today, we must rethink our networking methods.

I had an excellent career as a pension plan consultant working for a large consulting firm. After a few years learning the ropes, my supervisors impressed upon me that to reach my full potential, I needed to expand my network and my reach outside my Montreal office. Back then I would receive invitations by snail mail (in an envelope, no less!) to participate in conferences and working groups with actuarial colleagues as well as other professionals in both Canada and abroad. At the same time, I did volunteer work for the CIA and SOA, enabling me to exchange ideas with many great actuaries.

In attending a host of conferences throughout my career, I learned a great deal about actuarial theories and client challenges. Equally important, though, were the relationships I developed along the way. They helped me appreciate the various ways actuaries can approach a problem and recommend solutions, as well as the similarities and differences among actuarial practitioners in different parts of the world.

That being said, the era of in-person conferences has passed and won’t be coming back. We need to reimagine how to take advantage of this incredibly rich network of ours. While the pandemic brought our in-person activities to a screeching halt, I believe that COVID-19 merely accelerated an emerging trend founded on technological advances and the interests of new generations of actuaries.

A number of advantages, but a serious downside too

All around us, conferences are now being held using new technologies. The best example, no doubt, can be found in the US election campaign, which recently dispensed with in-person party conventions and speeches to throngs of partisans. Fortunately, the candidate debates are still scheduled to take place, allowing voters to see the two candidates interact in person, just like in the good old days.

Over and above the safety benefits in the midst of a pandemic, these new approaches seem to offer numerous advantages:

  • The days of flights and hotel stays are gone, saving us both time and money.
  • Less organizing is needed, allowing organizers to focus more on the content and event frequency.
  • Because the format is flexible, we can receive the live feed or tune in later to a recording at our convenience.

There is a downside, though. We do not yet know how to replace the value added of human interactions at these events. Those informal chats we used to have in the hallways during coffee breaks and various receptions contributed to our professional development. Our youngest colleagues are deprived of the chance to rub shoulders with their seasoned counterparts, to witness firsthand how they conduct themselves when it comes to, for example, rising to ask a question in front of a gathering.

In the wake of the pandemic, the CIA had to react quickly. In-person meetings scheduled by the Board and councils had to be replaced by telephone conferences and Zoom sessions. Similarly, the annual conference – originally scheduled for June – will be held online in the fall.

We have also had to cancel outreach meetings with public policy officials, actuarial clubs, and employers of actuaries. These sessions are aimed at informing public policy makers on questions within our areas of expertise and sizing up the needs of our members. We will be rescheduling these meetings for the fall, but on a virtual basis. This will save us time, but will they prove as rewarding as they would have been in person? Time will tell.

Reinventing CPD in the COVID-19 era

You belong to a profession known for its integrity and desire to protect the public interest, and you continue to have access to continuing professional development (CPD) to better serve your clients and employers. To that end, the Committee on Continuing Education and Head Office staff are working hard to organize the upcoming virtual events. Soon you will see the fruits of their labour: greater efficiency and flexibility, and a larger number of events.

A few months ago, the COVID-19 virtual town halls showed us how actuaries in different areas of practice were dealing with the challenges posed by the pandemic. These virtual forums gave us an early look at this brave new virtual world. Here’s an update on our events:

act20, the CIA’s annual conference, was scheduled for June but will instead be held virtually over two weeks in November. While this might seem to have been a simple decision, renegotiating large meeting contracts posed a ripple affect on contracts for the next few years. Our Head Office staff acted quickly to renegotiate these contracts with minimal financial impact. 

The Professionalism Workshops and Practice Education Course, which are both key educational events in the qualification processes for ACIA and FCIA, were also deferred. As a result, we reinvented and reengineered our entire education and professional development offerings which roll out this fall. 

The first virtual professionalism course was delivered on August 27 to 100 candidates – twice the number normally seen in person. The event was a success thanks to the flexibility and ingenuity shown by our facilitators and staff. The virtual PEC will take place mid-September, offering the same content at the track-specific level, with plenary sessions for all candidates delivered by guest keynote speakers and our own talented members.

On the professional development front, the Virtual Actuarial Evidence Seminar has rolled out as a series of webcasts on the last Thursday of each month, as will the Virtual Appointed Actuary Seminar, running from September 21 to October 1.

For the many actuaries who lack access to the same opportunities as those working for large corporations, the continuing education offered by the CIA is a lifeline. We operate in a competitive environment, so we must ensure that our content is relevant. We must also consider whether additional sessions exploring emerging fields and aimed at upgrading our soft skills should be offered. In our case, necessity is the mother of (re)invention, and our CPD services now have a wonderful opportunity to innovate.

I hope we succeed in offering new actuaries all the benefits of working in our actuarial community and the opportunity to connect with their peers. This certainly helped me during my career. We just have to find ways for our young actuaries to benefit from these networking opportunities as well.

What we have learned from all of this is that we are able to pivot quickly and reinvent ourselves. We have learned that technology is an invaluable tool for bringing us together and, at the same time, not infallible. We have learned that our community of members and staff are supportive, creative, and patient. The virtual events held recently by the CIA leave me confident that we can up our game and successfully navigate this digital transition.

Michel St-Germain, FCIA, is President of the Canadian Institute of Actuaries.

 
In Focus



In September 2016, in light of the work of the Blue Ribbon Task Force – which was created to accelerate the CIA’s strategic focus on influencing public policy – the Board approved the Policy on the Approval of Public Statements, expanding on the former Policy on the Approval of Public Positions. This task force explored various aspects of the CIA’s public affairs, including managing advocacy, engaging membership, and addressing single public policy topics within the Institute’s structure. The task force’s recommendations prompted the policy’s revision and the creation of Level 1 and Level 2 public statements, driving the CIA’s increased presence in public policy.

Since September 2016, the CIA successfully released multiple Level 1 statements, averaging two Level 1 statements a month in 2018 and 2019, and two Level 2 public statements in 2019: Retire Later for Greater Benefits – Updating today’s retirement programs for tomorrow’s retirement realities and Time to Act: Facing the Risks of a Changing Climate. We are currently working on two more Level 2 statements on pharmacare and risk classification. With this experience under our belt, the Public Affairs Council reviewed and refined the policy earlier this year. In collaboration with people involved in preparing prior Level 1 and Level 2 statements, we identified some improvements. The Board approved the revised version in June 2020.

The major change was restructuring the document by separating the processes in the two types of statements – as these steps were originally treated as one in the original. The new policy now follows each process individually. With this, the policy now better clarifies steps in the process, and offers clearer definitions of what falls under Level 1 or Level 2:

1. Level 1 – A public statement which requires only PAC approval (i.e., does not require member input or Board ratification).

Such a statement would be developed if/when:

i. An external request for comment is received, a response is requested of the CIA on a topic, or the CIA identifies an opportunity to proactively issue a statement on a topic; and

ii. The topic does not have a substantial element that goes beyond the scope and content of existing actuarial standards of practice, guidance, research, or public statements.

2. Level 2 – A public statement which requires PAC approval as well as member input and Board ratification.

Such a statement would be developed if/when:

i. The Board determines that the Institute should proactively draft a public statement on a topic that has a substantial element beyond the scope and content of existing actuarial standards of practice, guidance, research, or public statements; or

ii. An external request for comment is received or a response is requested of the CIA on a topic which has a substantial element that goes beyond the scope and content of existing actuarial standards of practice, guidance, research, or public statements.

Further changes were brought to what would be considered these types of statements, especially Level 1s, offering more example situations based on experience over the past few years. Importantly, the revised policy also emphasizes the link to CIA research, with a goal to maximize coordination of public statements with Research Council activities.

Looking ahead, this policy is an area that continues, even after these changes, to be under consideration. Although the PAC is currently extremely pleased with these policy updates, our review highlighted the need for some greater discussions and refinements to the types of outputs or goals that fall between the cracks of what might be considered a Level 1 or Level 2 statement. Sometimes a Level 1 is “not enough” and a Level 2 is “too much” for what the Institute might want to say or do on an issue. The PAC has launched a working group to explore this issue in more depth.

I offer my thanks to the members of the PAC, members of Single Topic Task Forces (charged with drafting our Level 2 statements), the numerous volunteers who drafted our many Level 1 statements and helped review and refine this document, and our peer reviewers from the membership who shared their input and ideas during the development of this version.

We hope to share drafts of the next Level 2 statements this fall and have a presence at the virtual act20 annual conference to discuss pharmacare and risk classification. Watch for these opportunities to engage in the process of influencing public policy and help actuaries’ voices be heard.

Bernard Morency, FCIA, is Chair of the Public Affairs Council.

MLBC INC
Valani Global
On the Horizon
  



By Jing Lang, FCIA

Before I came to a direct insurer, I knew very little about underwriting. Sure, I’ve heard of many buzz words: accelerated, automated, simplified issue, fully underwritten, but I didn't really know how it all worked.

Now I have been wearing a product hat for over a year, working for a direct insurer/insurtech who operates at an incredible speed. I’ve been deeply entrenched in every single product change we made – from launching brand new products to improving accelerated capabilities of existing products and more recently, adjusting our products and underwriting in response to the COVID-19 pandemic.

The ultimate test of how well I learned something is measured by my ability to explain it to others. So let’s get to it.

Guaranteed issue vs. fully underwritten policy vs. simplified issue

A general rule of thumb: the more (thorough) the underwriting, the healthier the block of insured population is, the cheaper the unit premium. In terms of thoroughness of underwriting, from least to most are guaranteed issue (GI), simplified issue (SI) and fully underwritten.

Anyone who wants insurance coverage can get a GI policy. Most GI policies are catered towards the senior population, especially those with underlying health problems who cannot get coverage through even simplified underwriting. In both the US and Canada, some whole life policies are GI. These products are typically small face amount for the purpose of covering funeral expenses.

A fully underwritten policy typically covers the whole nine yards. An applicant needs to answer very detailed medical questions on the application, get interviewed by a licensed health care professional, schedule for a paramedical exam, provide blood and urine samples, and wait for a decision by the insurance company. Each of these steps takes time. If all stars aligned, you may get a decision a few weeks after initiating the process, but more often it takes months. To compensate for the additional hoops you have to jump through and time you spent waiting, if you are offered coverage, the unit premium is likely the least expensive compared to unit premium offered from other forms of underwriting.

There are also very refined risk classes if you are offered coverage: super preferred, preferred, select, and standard. The names vary by carrier but it’s not uncommon to have 3-4 risk classes that are standard or better, with smoker-distinct rates. Products suitable for fully underwritten are the large face amount Term, Whole Life and Universal Life policies.

A simplified issue policy is somewhere in between. An application must answer some medical questions but not nearly as many as the traditional application form. The medical questions are usually “knock-outs,” as in if you answered “yes” to a question, you are not eligible for coverage. For example: In the past two years, for any condition (other than childbirth), have you been admitted to or confined in a hospital, nursing home, extended care, or special treatment facility for greater than three days?

Decision for simplified issue policies are typically made on accept or decline basis. Not often does an underwriter have to review the case before a decision is made. Risk classes for SI products are typically standard smoker and standard non-smoker, but there are carriers that also introduced substandard risk class, so that it can offer a cheaper rate for the standard non-smoker class. The decision time for SI is much shorter. Some self-starters can even do it themselves on the web. This ease of process and more lenient risk acceptance is compensated by a higher price. You will find SI product available on Term (typically less than 500K) and some supplemental health policies (such as critical illness). Everything else is the same (age, sex, face amount, smoking status), unit premium for an SI policy will be more than that from fully underwritten policy, but cheaper than a GI policy. 

Manual vs. automated vs. accelerated underwriting

Manual underwriting is where a human underwriter makes an underwriting decision. She makes that decision based on all the medical information gathered on the applicant. These include the self-disclosures on application form, lab results including blood and urine analysis, attending physical statement, among other inputs. Manual underwriting is part of the fully underwritten process.

Automated underwriting could mean different things depending on the context. Some refer to it as “no touch” underwriting where the underwriting decision is made based on pre-calibrated algorithms and does not need to be reviewed by a human underwriter. Some SI products leverage this.

Others refer to it as the data pull portion of the underwriting, such as pulling MIB, MVR, Rx, and other information on the applicant to facilitate the underwriting process. Applicant disclosure and results of the data pulls form the basis of the underwriting decision. Depending on the result, the applicant could receive an instant decision (approve or decline). If more information is warranted, the case may get referred to a human underwriter to evaluate the application in more detail.

Some commonly used data pulls in the US and Canada are:

1. MIB (Medical Information Bureau). The MIB details are in a coded format that covers medical conditions such as diabetes and risky hobbies such as skydiving and rock climbing. An insurer cannot make an adverse decision based on MIB codes alone. It’s meant to facilitate the overall evaluation.
2. MVR (Motor Vehicle Record). This indicates driving behavior. Someone with multiple DUIs (Driving Under the Influence) and moving violations in the last two years would warrant concern from an insurer.
3. Rx (prescription drug history). This is where each insurer can calibrate medical conditions and drug history combination based on its own risk tolerance. For example, one carrier may be more lenient about liver conditions than others. Based on the rules established here, an insurer can decline an applicant if the combination warrants a risk beyond its threshold.

Accelerated underwriting can be synonymous with the second interpretation of the automated underwriting. It uses data pull results and applicant disclosure to make underwriting decision. The goal is to deliver a customer experience closer to simplified issue (less wait time, obtain decision in minutes to days, as opposed to weeks to months) but at a price closer to fully underwritten (cheaper per unit premium than simplified issue.)

It’s commonplace now for accelerated capabilities to be embedded in the fully underwritten products. Many carriers offer their Accelerated Underwriting (AUW) program for applicant up to 60 years of age and face amount up to one million for standard and better risk classes. Other medical information (paramedical exam, attending physical statement, etc.) is not requested unless warranted. But even with this less invasive process, many carriers still mandate a separate tele-interview, stretching the decision time to days.

Impact from COVID-19

COVID-19 brought unique challenges. We as an industry might have underestimated the perceived impact in the early months. It was seen as a disease impacting Asian countries, until it became clear that this is a global issue. Many carriers have since introduced temporary underwriting and product changes and committed to reevaluate as this pandemic continues to evolve.

The changes we see in the market can be broken down into the following functions below.

Application

As mentioned earlier, the application form is the bread and butter of underwriting. Filling out this form requires the applicant to self-disclose underlying health conditions and certain personal and lifestyle choices (i.e., hobbies, driving history). The applicant’s self-disclosure gives the carrier the ability to contest a claim within two years of a policy issuance.  

By now, most carriers have introduced COVID-19 specific questions on their existing application forms, asking about travel history, positive testing results, and any known contact with positive cases. Some carriers even introduced COVID-specific questionnaires, asking more elaborative questions such as symptoms. A signed statement of insurability is required with every app. This requires the applicant to disclose whether they had a change in health if some time has passed since they filled out the original application. This again, will protect the insurer from inaccurate information – intended or not – if a policy-holder files a claim within two years. In the event that an applicant did disclose a recent diagnosis of positive COVID-19, his application is typically postponed till he recovers and symptom free for one month.

Underwriting changes

Fully underwritten programs were detrimentally affected by COVID-19, since many in-person exams cannot be conducted. Cases where a lab result is a key input were inevitably delayed. One silver lining of COVID-19 is that it expediated the need for the carrier to explore alternative medical information to make underwriting decisions. Adoption of Electronic Health Record (EHR), Human API, WOMBA, LabPiQture, medical claims data, and prior insurance exams completed within the past 24 months all became more common place.

In contrast, accelerated underwriting programs flourished during COVID-19. Carriers who already have an AUW are expanding their program, notably increasing maximum coverage for younger ages. Carriers who not yet have an AUW were racing to launch one. Phone interview is still a norm.

Product and pricing changes

Since we are likely to have more underlying conditions we age, the over 60 population are particularly vulnerable to COVID-19 due to comorbidities. Across all product lines, almost all carriers reduced the maximum issue age to 70 or below, scaled back on maximum coverage and limited rated (substandard) table offerings.

Changes in underwriting will trickle down to changes in pricing. For products that rely on fixed crediting rate or stock market returns, many rate changes have already taken place. Many carriers offering No Lapse UL have introduced new (higher) rates. For Term products, rate changes from COVID-19 are less urgent. Much of the Term rates update in the last six months are still in response to updating to the new 2017 CSO Table. We shall see in the next few months if Term rates will increase.

Conclusion

Underwriting is a key pillar of the insurance industry. While actuaries price and evaluate risk on a law-of-large-number basis, underwriters look at risk on an individual basis. However, as underwriting technology continue to evolve and the increasing focus on customer journey, more and more underwriting decisions will be made based on rules and algorithms. The potential synergy for actuaries and underwriters to work together is greater than ever before, same goes for the opportunity cost of working in silos.

There is still a lot we don’t know about COVID-19. When will an effective vaccine be developed? Will it mutate to a different string? Can people who recovered from COVID-19 get it again? What is the impact on young people and children? What happens as we get into the flu season? This pandemic has already changed the way we live. And as it continues to evolve, we as an industry have to remain vigilant and flexible in order to actually predict any impact and price accordingly.

Jing Lang, FCIA, is Vice-President, Product Manager, at iptiQ. To learn more about the impact of COVID-19 on underwriting, listen to our podcast.

Institute News



By Jacqueline Friedland, FCIA

In June the CIA’s presidential officers shared a statement on diversity, reinforcing the CIA’s values of integrity, objectivity, and improving the lives of all Canadians – values that are important to us as actuaries, professionals, and individuals. In the face of the racial discrimination and unrest we see in Canada, the US, and around the world, upholding these values is more important than ever.

The presidential message also included an announcement that a CIA Task Force on Diversity had been established, which I am honoured to chair. The task force, comprised of a passionate group of your colleagues and Head Office staff, began working in early July. Our first task was to propose our mandate and objectives for the Board to review at their September meeting, which we present as follows:

Mandate

  • To promote diversity and inclusion within the CIA community and the Canadian actuarial profession.
  • To enable education of Canadian actuaries with respect to diversity and inclusion.

Objectives

  • Undertake a voluntary survey of CIA members and leadership to assess the composition of our membership and leadership with regards to minority groups and their representation.
  • Examine and evaluate CIA policies and standards of practice with regards to diversity and inclusion.
  • Investigate and subsequently recommend approaches to increase interest in the Canadian actuarial profession from diverse population groups (e.g., targeted scholarships, presentations to targeted student groups).
  • Invest in diversity-focused educational resources for professional development, such as:
    • speakers at events (e.g., Professionalism Workshop, Practice Education Course, act Annual Conference)
    • books, articles, podcasts, and videos
    • development sessions for CIA leaders.

As noted above, the first critical task is to collect data on the diversity of our current membership and leadership. We engaged Diversio, a Canadian data and analytics company that focuses on supporting organizations in becoming more inclusive, to run a survey to evaluate diversity and inclusion in the CIA. The survey is currently open and accepting responses until September 15.

Our profession is one of the best placed to understand the importance of robust data as the basis for decision-making. Thus, the participation of every member in this survey is essential. Only with your input can we better understand the composition, needs, and experiences of our membership and establish the best next steps for our Institute with regard to diversity and inclusion. I strongly encourage you to complete the survey today (if you haven’t already).

While awaiting the survey results, we have begun to engage with other organizations such as the International Association of Black Actuaries, the Actuarial Foundation of Canada, and the SOA/CAS Joint Committee on Inclusion, Equity & Diversity. We have also begun to explore tools and resources that we could offer to current and potential future members and we intend to reflect on any possible changes to our activities and structures in matters of diversity and inclusion.

The results of the survey and learnings from discussions with others will be presented at the next CIA Board meeting on September 22. At this meeting, we will discuss the survey results and next steps. This will be the first of what I expect to be many discussions as we move to ensure that the CIA and the actuarial profession in Canada is both diverse and inclusive.

Over the past few months I have been heartened to speak with many of you and receive your email comments, both congratulating the CIA on this important undertaking and sharing your concerns and critiques on different aspects of the organization and profession. Let me assure you that you are being heard! Please continue to reach out via the survey or our confidential email feedback@cia-ica.ca to share your thoughts.

On behalf of the CIA Board and the CIA Task Force on Diversity, I want to thank you for your collaboration in these important initiatives and I look forward to sharing more results and outcomes with you soon.

Jacque Friedland, FCIA, is President-Elect of the CIA and Chair of the CIA Task Force on Diversity.

 

 

It looks like the Seeing Beyond Risk podcast team didn’t take a break this summer! The series has been truly enhanced by several episodes over the past few months. Below is an overview of the topics covered and links to the recordings:

  • On the seas with Richard Gauthier: In June we kicked off the summer with a lighter podcast featuring CIA member, Richard Gauthier, a world traveler by sailboat fulfilling a long-time dream (episode 50).
  • A presidential transition: interview with Marc Tardif and Michel St-Germain: Highlighting the Institute’s presidential transition in July, Past President, Marc Tardif and our current President, Michel St-Germain look back on the past 12 months and discuss what lies ahead for the coming year (episode 52).
  • Applying ERM to long-term care in Canada: In this interview, Bonnie-Jeanne MacDonald, FCIA, draws from her research paper’s major findings to explain how an enterprise risk management approach could apply to long-term care in Canada – a timely topic in the year of COVID-19 (episode 54).
  • Research paper on accident benefits – long-term disability: We published a research paper on accident benefit long-term disability claims. Report authors Sherry Feng, Anh Tu Le, ACIA, and Adam Peleshok, FCIA, join us to discuss their research (episode 55).
  • Contingent pension plans: Barbara Sanders, FCIA, and Barry Gros, FCIA, discuss their recent work published by the C.D. Howe Institute, dealing with the sustainability of contingent pension plans, and how a principles-based regulatory framework may be better suited to these types of arrangements (episode 57).
  • Changes to commuted value standards: On December 1, 2020, the rules governing the calculation of pension commuted values will change. Gavin Benjamin, FCIA, joins us to discuss the upcoming changes, the reasons behind the revised rules, and how they could affect pension plan members (episode 58).

Don’t miss the new episode we’ve just released. On your autumn strolls, you can listen to thoughts on the major changes to insurance underwriting due to COVID-19, and increased attention on the development of predictive analytics for risk assessment.

We will also be interviewing Étienne Dubé, Vice-President and Portfolio Manager at RBC, on the liquidity situation of fixed income assets.

Be sure to add Seeing Beyond Risk to your podcast list. Subscribe to Spotify or Apple Podcasts for access to new episodes automatically.

If you have a topic you’d like to hear, or would like to discuss in an episode, do not hesitate to contact the CIA podcasts team.

It is with regret that we share the death of Dawei Xiao, also known as David, who passed on August 16, 2020, climbing the mountains he called home.

David was born in China, and immigrated to Calgary with his parents at the age of 12. He earned his bachelor of mathematics in actuarial science in 2015 from the University of Waterloo but his yearning for the Rockies brought him back to Calgary, where he was hired by Intact Insurance as an actuarial analyst in the P&C insurance area. He passed his actuarial exams in quick succession, becoming an FCIA in 2020 while also cultivating his passion for the outdoors.

David was generous with his time and energy toward many causes he felt strongly about. He is remembered by his family, friends, and co-workers. Donations in his honour may be made to the Outdoor Council of Canada or to the ALS Society of Alberta.

PartnerRe
RGA Canada
Events News

 

Kicking off on September 21 at 11:00 ET, join us for a joint plenary session on the global impact of COVID-19 on insurance mergers and acquisitions. Delivered over two weeks, through to October 1, the Appointed Actuary Virtual Seminar offers seven joint sessions and six concurrent sessions with life and P&C tracks.

With a focus on high-quality content, session topics include:

  • COVID-19’s impact on population excess deaths and insurance claims in Canada;
  • IFRS 17 – implementation challenges and updates;
  • the role of P&C actuaries in the face of climate change;
  • negative interest rates and the insurance industry, and so much more.

Registration closes September 14.

Check out the full program.