What does Risk Feel Like? Insights from Behavioural Economics Part II

Risk Insights®

2010Vol. 14, No. 2

Contents

What Does Risk Feel Like? Insights From Behavioural Economics – Part IIby Bernhard Wolters 2

Milk, Sugar, Bread and Life Insurance ... is Shopassurance on the List?by Ross Campbell and Andres Webersinke 4

Insurance Offerings in the Supermarket –A Look at the Current Legal Situation in Germanyby Andrea Giese 8

Diabetes Underwriting Reviewby Kevin Uryase 10

The World Cup – Shattered Dreams and Broken Heartsby Ian Cox 13

Inside Gen Re LifeHealth 16

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which the activities fitted the personality descriptiongiven. The following two items on the list were ofparticular importance:

A. Linda is a bank teller

B. Linda is a bank teller and is active in the feminist movement

The results showed 89% of respondents ranked Bhigher than A despite the fact that, according toprobability theory, the conjunction of “is a bankteller” and “is active in the feminist movement”must be less likely than A (being at least a bankteller). Obviously, respondents were intuitivelyguided by the similarity heuristic, according towhich B resembles the initial personality descriptionmuch more than A.

AvailabilityThe availability heuristic is used to predict theprobability of something happening according tothe ease with which an example of such an eventcan be brought to mind. It is a useful clue becauseinstances of significance are usually recalled betterand faster than those with less significance. Incorrectevaluations occur because the ease with which wecan retrieve or imagine significant events does notalways reflect their actual frequency. More oftenthan not, the emotional vividness with which eventscome to mind lead to an overestimation of theirprobability, just as much as the lack of retrievableinstances results in an underestimation of theirprobability. The ups and downs that followed themedia attention of the recent H1N1 pandemic hypeare a telling example.

What is left of rationality?So far, we have considered risk decision-makingfrom both a descriptive angle (prospect theory) anda practical point of view, adopting EUT as a standardby which our logic may be judged. What does allthis tell us about human rationality? Is it a fancifulconcept caught in a shadowy realm betweenrationally derived ideals and those conclusions we

The last issue of Risk Insights provided anintroduction into Expected Utility Theory (EUT) and how the homo oeconomicus, with a perfectunderstanding of preferences, uses unblemishedrationale to maximise benefit. However, real-worldbehaviour in decision-making differs only too often.A further dimension is added when decision-makersassess probabilities subjectively by applyingeducated guesses.

Subjective assessment of probabilities In Part I of this two-part article series, probabilitieshave been treated as given. The problem of thesubjective assessment of probabilities was exploredby Kahneman and Tversky in a separate line ofresearch, which became known under the header“heuristics and biases”.1 Kahneman and Tverskydiscovered that when people assess the probabilityof uncertain events, they rely on a number ofheuristics (rules of thumb) that reduce thispotentially complex task to a simpler, judgementaloperation. The heuristics Kahneman and Tverskyidentified were: similarity (or the rule of typicalthings), availability (or the example rule)2 andanchoring. Though generally useful, theseheuristics can lead to systematic errors and biases,which are considered in further detail for thesimilarity heuristic and the availability heuristic.

SimilarityWhen we are dealing with such questions as theprobability of object A belonging to class B, or theprobability of event A originating from process B,we typically resort to the similarity heuristic, inwhich probabilities are assessed by the degree towhich a given scenario resembles another. To seehow this can be prone to error, consider thefollowing experiment in which subjects were givena brief personality description of a woman calledLinda. Kahneman and Tversky designed thedescription to strongly match people’s image of anactive feminist. The subjects were presented with alist of professions/activities and were asked to rankfrom most to least likely according to the extent to

What Does Risk Feel Like?Insights From BehaviouralEconomics – Part II

Bernhard WoltersSenior Account ExecutiveGen Re LifeHealth, Germany

Risk Insights, 2010 – No. 2 3

From a purely logical point of view, the problems in Figures 1and 2 are identical. However, the cheater version in Figure 2makes it much easier for most of us to derive the correctsolution. This has also been confirmed in a number ofexperiments.4

EUT and prospect theory – as outlined in Part I of this series –suggest that human beings are unable to cope with risk in anentirely rational way, where “rational” is supposed to denote“reasoning according to the rules of mathematics, logic andprobability theory.” Moreover, recent psychological researchappears to undermine the traditional notion that rationalityexcludes all emotion. “A theory of choice that completelyignores feelings such as the pain of losses and the regret ofmistakes is not only descriptively unrealistic; it also leads toprescriptions that do not maximise the utility of outcomes…”5

ConclusionWhich lessons can insurance professionals draw from theabove account? One salient feature appears to be the fact thatideal solutions are difficult to achieve in the presence of manypitfalls. Rather than wasting time on searching for the perfectdecision, one should instead make sure that internal processesallow for constant adjustments of past actions and riskychoices. Hampering such efforts is a tendency to frequentlysuccumb to the so-called confirmation bias. This, for instance,makes a majority of people, who play the game set out inFigure 1 above, choose card 5 instead of card 4.

Last but not least, intuition or gut feel appears to play a valuablerole in decision-making under risk. A cautious overall approachto anything new, especially when it involves significant risks,intuitively makes a lot of sense. Even the most refinedmathematical models should not be allowed to invariablyoverrule our gut feeling. After all, you would not invest all yourmoney in the St. Petersburg Gamble (see Part I), would you?

Endnotes1 Kahneman, D. and Tversky, A. Judgement under Uncertainty:

Heuristics and Biases. Science, 185, 1974, pp. 1,124-31.

2 Gardner, D. Risk. The Science and Politics of Fear. London 2009, pp 47-8.

3 Samuels, R. et al. Reason and Rationality. Handbook ofEpistomology, 2004, pp 24-5.

4 Samuels, R. and Stich, S. Rationality & Psychology. The OxfordHandbook of Rationality, 2004, pp 15-21.

5 Kahneman, D. Maps of Bounded Rationality: Psychology forBehavioural Economics. The American Economic Review, Vol. 93,No. 5, Dec. 2003, p. 1,457.

draw from our experience? Or does rationality have a practicaluse in day-to-day coping with reality, in the sense that usingits rules – in a broad sense the rules of logic, probability theoryand so forth – helps us achieve our objectives?

This topic is under continuous discussion among psychologistsand philosophers. Another is the question of whether deviationsfrom rational behaviour only occur because our decisionproblems are framed in terms of modern, abstract concepts –concepts very different to those our cognitive apparatus hadto develop in the conditions that prevailed during the greaterpart of our evolutionary history and that are not comparablewith most of the challenges we face today. To explore thisfurther, let us consider one of the hypotheses in this line ofreasoning, according to which the ability in humans to detecta cheat has been highly adaptive, a result of our evolutionarypast. One would therefore expect that if tasks, on whichperformance has been poor, are rephrased in a “cheat’s”version, the results will significantly improve. There appears tobe evidence that this is indeed the case.3 The test as depictedin Figure 1 provides an intuitive idea of what this is all about.

Figure 1 – Example of a selection task problemEach card shows a letter on one side and a number on thereverse side. Shown are four cards, two with the letter sideup, and two with the number side up.

E C 5 4The task is to identify the cards that need to be turned overto determine whether the following claim is correct:

“If a card shows a vowel on one side, then the other sideshows an odd number.”

Source: Samuels et al. Rationality & Psychology. The Oxford Handbook ofRationality. 2004; pp 279-300.

The correct answer for the task in Figure 1 is card E and card 4.

Now consider the following selection task depicted in Figure 2.

Figure 2 – Another example of a selection task problemFour cards are given. Each card contains information about a person sitting at a table. While the one side of the card tells what a person is drinking, the other side shows theperson’s age.

Drinking Beer Drinking Coke 25 years old 16 years old

The task is to identify the cards that need to be turned overto determine whether the following law is broken:

“Only people aged 21 years and older are allowed to drinkbeer.”

Source: Samuels et al. Rationality & Psychology. The Oxford Handbook ofRationality. 2004; pp 279-300.

The correct answer for the task in Figure 2 is “Drinking beer”and “16 years old”.

Bernhard Wolters is Vice President within the life and health department of Gen Re and has for many years been responsible for theDutch and Scandinavian markets. He can be reached at Tel. +49 221 9738 848 or [email protected].

Milk, Sugar, Bread and LifeInsurance ... is Shopassuranceon the List?

Time was when shopping for food and otherhousehold requirements meant visits to severalindependent retailers: the butcher, the fishmonger,the draper, the iron-monger and so on. In mostmarkets this picture changed during the lastdecades, and the number of self-service shops and supermarkets increased to meet increasingcustomer demand and expediency.

Today, shoppers can obtain almost everything theymight need from a single “food” retailer. Increasingly,the supermarket giants responsible for thedevelopment of the modern-day convenience storeare also well-placed to increase their penetration ofthe financial services market, including life insurance.They have the distribution network, the loyalty ofcustomers and the financial muscle.

Brand value and ShopassuranceReputation, loyalty, favourable core financialperformance indicators, regulatory compliance,and high-quality customer services based on trust,are key factors when selling an intangible product,such as insurance. Whether “the reputation ofmany retail banks has all but evaporated”1 or thetrust level has at least halved2 may be moot, butclearly, the ongoing economic crisis has severelydamaged confidence in financial services. In suchan environment, insurance companies may want to review their strategy of selling insuranceproducts through bank branches (Bancassurance)and look at the possibilities in the grocery retailsector as an emerging and novel distributionchannel (Shopassurance).

Successful strategies for exploiting this channel willdiffer by participant and market. In China, India andSouth Africa, for example, banks have maintained agood reputation throughout the global financialcrisis, while elsewhere insurance and banking are soclosely interwoven as to make it seem impossible toconsider supermarkets selling life insurance.

Furthermore, traditional distribution channels –including Bancassurance – have found difficulty infully developing certain segments, including lowrevenue products, micro-insurance and sales toconsumers living in rural areas. Shopassurance is ofparticular interest where cost-effective distributionis unachievable through traditional channels. Takingthis further, retailers could be the dominantdistribution channel in rural areas, where Internetconnectivity is low and policies must be issued overthe counter.

If there was ever a favourable time for retailers andsupermarkets (Shopassurers) to enter the financialservices sector, it is perhaps now, while the bankswork hard to restructure following the globalfinancial crisis.3 To enter this market with simpleand transparent products on the back of a well-known brand may prove a recipe for success.Opportunity exists for Shopassurers to pick upwhere the Bancassurers left off. Can retailers andsupermarkets achieve what banks took a long timeto work out – the mutual beneficial relationshipbetween having the regular contact with consumersand insurance sales? Can the face of food andfashion be combined with the selling of insurance?

According to the 11th Annual Harris Interactive U.S.Reputation Quotient® Survey conducted in early2010, the retail industry is one of the sectors withthe most positive perceptions, as shown in Figure 1.4

Figure 1 – Industry sector reputation: 2008 and 2009positive ratings in percent

4 Gen Re LifeHealth

Ross CampbellChief Underwriter – Research & DevelopmentGen Re LifeHealth, UK

Andres WebersinkeHead of LifeHealth Research & DevelopmentGen Re LifeHealth, Germany

0%

10%

20%

30%

40%

50%

60%

70%

80%

2008

2009

Reputation, quality and value of money are the three topprimary reasons for choosing the most trustworthy retailer inthe UK according to one survey. In general, the trust scorecorrelates with the market share as shown in Figure 2.5

Figure 2 – Trust by “Market Share” correlation (UK retailers are depictedas diamonds, supermarkets as circles)

Financial services offered by retailers andsupermarketsMany UK retailers and supermarkets offer a suite of financialproducts – including car, home, travel, pet, dental and healthinsurance – alongside their savings, loyalty schemes, creditcards and loans. Life insurance is also available, although itremains under-developed currently.

The retailers and supermarkets marked orange in Figure 2above have not only entered the financial services sector butalso offer life insurance products and quotations, namelyMarks & Spencer, Tesco, Asda, John Lewis and Sainsbury’s.Argos, UK’s largest general-goods retailer, uses its website toredirect potential buyers of an over-50 plan to a partner lifeinsurer, and redirects buyers of other plans to a comparisonwebsite, earning fees and commission.

What began in some stores with cash withdrawals (cash-back)continued with supermarkets offering credit cards (with theopportunity to earn loyalty points) and later offering savingsand simple insurance products. Retailers have experimentedwith financial services over a number of years, often changinginsurance or bank partners. The banking crisis has acceleratedthis development. Royal Bank of Scotland sold to Tesco its50% joint venture share of Tesco Personal Finance, a companyregulated by the Financial Services Authority, and “a movewhich will enable Tesco to develop an already very successfulfinancial services offer towards the objective of becoming afull-service retail bank”.6 This represents a part of Tesco’s planto provide 10% of the UK’s financial services market within thenext ten years.

Tesco is the UK’s seventh largest credit card provider withbalances of more than GBP2 billion, and it offers savingsaccounts.7 Despite banks applying a conservative mortgagelending strategy after the crisis, the retailer plans to enter themortgage market by the end of this year.8 And while UKretailers increase their number of stores, banks, in contrast,are closing branches across the country. This contraction intraditional banking sector outlets and services may create agap which the supermarkets will fill.

Each site offers the retailers an opportunity to engage withcustomers on multiple occasions and possibly for longperiods of time. As more and varied goods are available forsale, additional services, such as food snacking, photo printingand pharmacy care, serve to increase customer stay time.

Tesco is already an established international retailer withbusinesses in the UK, Ireland, Hungary, Poland, CzechRepublic, Slovakia, Turkey, Thailand, South Korea, Malaysia,Japan, China and the U.S., with plans to enter the Indianmarket. With nearly half of the more than 4,500 stores beinglocated outside the UK9, it is not difficult to see that the idea ofShopassurance will become widespread. French supermarketchain Carrefour already offers life insurance products in variousmarkets, including Brazil and Thailand.

How to seize the opportunity?Does a banking crisis, added to the good reputation of retailersand supermarkets, automatically lead to opportunities? UKresearch showed only 10% of those surveyed said they’d be“more likely” or “much more likely” to bank with a supermarketin the future, and 55% of people said they were “neither moreor less likely”.10 Besides loyalty and trust, the most importantassets for retailers are the traffic and time that shoppers spendwith them, as well as shopping details and preferences collectedvia loyalty cards.

It is well understood that a significant proportion of retailpurchases is based on impulse. How can this shoppingbehaviour work for the sale of life insurance? Can a display ofbrochures and leaflets offering life insurance be a successfulsales vehicle in a supermarket environment? Tesco, forexample, uses multiple sales channels, including in-store, by telephone and online. Approximately 60% of new salescome through online.11

Shopassurers do not currently provide financial advice inconnection with life insurance, and their marketing material ispurely factual, although some do offer help in finding anindependent financial adviser. The risk of mis-selling is thus aproblem for Shopassurers. It is not surprising to read suchimportant information in leaflets as “Depending on how longyou live, the amount of the premium you pay may be greaterthan the cash sum paid out in the event of your death” – ascenario that could arise after a 15-year premium payment periodfor a 60-year old male taking out a guaranteed acceptance life plan with a monthly premium of GBP10, for example.Whether such a sale of insurance is an active or passive eventhas created an interesting debate in the German market, andis described in a separate article of this issue of Risk Insights.

Currently, UK retailers offer basic level Term Assurance,providing a fixed amount on death during the term of thepolicy, and Decreasing Term Assurance designed to pay off astandard repayment (capital and interest) mortgage with alump sum that reduces every year in line with the mortgage.Often the benefit is accelerated in case of Terminal Illness (TI).In some cases, a Critical Illness (CI) benefit may also be availableas a rider benefit. Simplified products aimed at buyers betweenthe ages of 50 and 75 or 85 are also sold. For such plans, thepremiums are generally low (e.g., up to GBP50 per month) in

5Risk Insights, 2010 – No. 2

Tesco

Argos

M&S

Asda

Sainsbury's

John Lewis

0%

5%

10%

15%

20%

25%

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Which of the following retailers and supermarkets have you used to make a purchase in the last 12 months?

return for a fixed sum assured, with the added advantage thatno medical underwriting is required. Their design is mostlikely to incorporate a two-year moratorium, during whichonly accidental death is covered, in addition to a return ofpremiums (sometimes up to 150% of paid premiums) in caseof natural death. Policyholders cease premiums typically atage 90, although their plan remains in force. Term policiesmay be single or joint life, and premiums are varied by sexand smoking status. It is typical for the full quotation andunderwriting process to be undertaken online or over thetelephone. Supermarkets’ financial services websites advertiseaffordable cover, quick quotations and cover – available inminutes. Shopassurers may offer incentives to potential buyersin the form of points added to loyalty card schemes, discountvouchers or gift tokens.

Table 1 provides an overview of the current offerings in regardto life insurance, including the financial services arm used infacilitating the offerings as well as the regulatory status theseentities have according to the UK Financial Services andMarkets Act 2000.

Typically, Shopassurers badge protection products from lifeinsurance companies, but it may prove tempting for them toconsider whether their customers would accept a retailer’s“own-brand” life insurance, whereby the retailer is also theultimate risk taker, in future. UK retailers that currently offerprotection cover do so with the support of established lifeinsurers; however, all retailers use their own brand name andbrand colours in their offering, so there is no doubt in theconsumer’s mind about who is the active seller.

UK customers who accept a Shopassurance quote for lifecover are then typically asked to disclose lifestyle, build,medical and family history, plus details of medication, in asecure, password-protected environment. Tele-interviewing isoffered as an alternative route for providing disclosure. Wherepossible, terms are offered immediately, but traditionalmedical evidence, including a doctor’s report, paramedical(nurse screen) or full medical examination may be obtained.Some applications will be vetted by underwriters at the homeoffice. The entire process is usually supported by a telephonesupport line in case of difficulty. In short, a full and modernunderwriting basis is being applied.

6 Gen Re LifeHealth

UK RetailerFinancial Services

CompanyOwnership of Financial

Services CompanyLife Insurance Offered Risk Taker (insurer)

Tesco Stores**(100% Tesco)

Tesco Personal Finance*and

Tesco Personal FinanceCompare*

100% Tesco Term life, TI, CIFriends Provident

Compare as broker arm

Marks & Spencer**

Marks & Spencer Money*and

Marks & Spencer LifeAssurance*

100% HSBC Group, M&Sprovides brand name

Term life, TI, accidentaldeath

HSBC Life

Asda*** ASDA Financial Services*** 100% Asda Term life, CI, IP Acts as an introducer only

John Lewis/Waitrose**

Greenbee**100% John Lewis

PartnershipTerm life, TI, WoP Friends Provident

Sainsbury’sSupermarkets**

Sainsbury’s Bank*50:50 partnership

between retailer andLloyds Banking Group

Term life, TI, CI Legal & General

Argos*** (owned byHome Retail Group)

Home Retail GroupInsurance Services*

100% Group Term life, WL, IP, CIActs as a broker and

provides link to Sun LifeDirect (AXA)

* Authorised (to carry on a regulated activity)

** Appointed Representative (agent of an authorised firm that has accepted responsibility)

*** Introducer Appointed Representative (appointed by a firm whose scope of appointment is limited to a) affecting introductions, and b) distributing non-real timefinancial promotions)

Table 1 – Overview of UK retailers offering life insurance(IP = Income Protection or Long-Term Disability cover, WoP = limited Waiver of Premium, WL = Whole Life insurance)

SummaryShopassurance is more than simply offering insurance for salein-store. It aims to take advantage of the frequent contact thatexists with a wide range of consumer groups. Retailers canuse their brand name and increasingly diverse offerings toprovide simple financial services products. As with groceries,the life insurance on offer must be convenient to purchaseand consume. Leaflets at checkout points or next to in-storeATMs create repeated contacts with impulse buyers. The useof loyalty schemes – often combined with retailer-brandedcredit cards – provide retailers with key information to use inmaking successful direct marketing via telephone and mail totheir customers. As consumers increasingly opt to ordergroceries online, retailers use this medium to advertise andoffer insurance products as conveniently as they currently domilk, sugar and bread.

Shopassurance is also a means to reach insurance customersdeemed previously inaccessible. This may be particularly truein quickly developing countries such as India, China, Indonesia,Vietnam and Brazil, to name a few.

The exploitation of the alternative distribution channel,Shopassurance, will result in a higher penetration rate of lifeinsurance cover in both developed and developing markets.More individuals having protection cover is good, but buyingpersonal insurance without advice has its problems; forexample, CI cover should not be sold in the same way as petinsurance. Providers of life insurance in supermarkets need tofind methods to prevent sales of unsuited products and ofgiving the impression of sufficient cover, when this is not thecase. So-called “money centres”, kiosks for financial servicesproducts already established within some hypermarkets, mayprovide the solution.

Features of current Shopassurance offerings are quick issuance,low premium and sales support through different media.Underwriting must fit these criteria. For insurers, retailers offer

an attractive alternative distribution channel that may notreplace Bancassurance or other forms of traditional distributionchannels but would complement a distribution strategy andextend their reach to more consumers. Most insurers havesufficiently simple products, but a review of the products willbe needed to reflect the required underwriting approach andto ensure that low premium levels are achievable. However, asit stands, an insurer’s brand will be at best a backdrop to theofferings provided by the retailer.

Endnotes1 Haig, D. A question of trust, The Banker, June 2009, p 29.

2 Between 2007 and 2010 in selected Western countries, accordingto the Edelman Trust Barometer 2010 and based on the question:“How much do you trust banks to do what is right?”.

3 Based on a citation from Michael Lafferty from the Lafferty Group,a retail banking research house, published in “Cash and Carry”,Financial Times, 20 July 2009.

4 The Annual RQ® 2009 Summary Report from Harris Interactive,www.harrisinteractive.com/vault/2009%20Annual%20Reputation%20Quotient%20Media%20Summary%20Report_public.pdf,accessed on 5 April 2010.

5 The Insight Survey, May 2009, Retail Insights,www.theINSIGHTsurvey.co.uk.

6 Annual Report and Financial Statements 2009, Tesco plc.

7 mediacentre.tescofinance.com/help/about_us/key_facts/, accessedon 11 April 2010.

8 www.cityam.com/news-and-analysis/tesco-reveals-banking-target,accessed on 11 April 2010.

9 www.tescoplc.com/plc/about_us/map/, accessed on 11 April 2010.

10 The Insight Survey, May 2009, Retail Insights,www.theINSIGHTsurvey.co.uk.

11 mediacentre.tescofinance.com/help/about_us/key_facts/, accessedon 11 April 2010.


Ross Campbell is Chief Underwriter – Research & Development of Gen Re LifeHealth, a role with international responsibility. He canbe reached at Tel. +44 20 7426 1803 or [email protected].

Andres Webersinke heads Gen Re LifeHealth’s Research & Development unit in Cologne, which combines actuarial and medical/underwriting resources. He can be reached at Tel. +49 221 9738 684 or [email protected].

Insurance Offerings in theSupermarket –A Look at the Current LegalSituation in Germany

Whether aiming to retain market share, expand intonew market segments or simply to remain competitive,insurers are continually looking to expand the reachof their products through new and innovative saleschannels. With this in mind, it is not surprising to see insurance products promoted for sale insupermarkets and other retail venues. Insuranceproducts first appeared in German retailers in 2001,when a retail chain selling coffee and a wide rangeof other products formed a partnership with an insurerto offer motor liability insurance. This innovativesales outlet idea was soon followed by a book club,a petrol station chain, a chemist chain and a clothingstore. After a while, however, most of these retailersended their co-operations with insurers, as theirfinancial expectations could not be met.

One obstacle to the success of these ventures provedto be the strict German regulations on the qualificationof insurance intermediaries and on the provision ofinformation and advice to potential policyholders.In recent years, these regulations have become eventighter, to the extent that it is debatable whetherthey can be adhered to fully when selling insuranceproducts in the retail sector. Unsurprisingly, therehave already been some legal disputes in the recentpast as well as first judgements that could point theway forward.1 It is worth noting that the plaintiffswere not consumer protectors, as might be expected,but actually an association of insurance brokers andagents, as well as a group for the protection of faircompetition. There is speculation that resistance fromthe association was ultimately motivated by concernfor their own market shares and, by implication,recognition of the potential in the business modelof offering insurance products in shops anddepartment stores.

The judgement2 in the following case certainly causeda storm. A supermarket chain offered for sale abundled insurance package covering personal accident,legal expenses for a victim of a criminal case and an accident and breakdown cover. The productliterature was made available to customers in boxescosting EUR49 each, including documentation, anapplication form and a PIN number to facilitate the

purchase. Customers choosing to purchase theproduct did so by postal application, facsimile oronline registration, with the certificate of insurancebeing mailed. The initial purchase price was offsetagainst the required insurance premium. If thecustomer changed his mind and decided not to goahead, a refund of the purchase price was availableon return of the box and receipt to the supermarket.

The plaintiff argued that the supermarket had beenbrokering insurance without the necessary licence.In its defence, the supermarket responded that it was acting merely as an introducer (making asuggestion) and therefore required no such permission.According to the German Trade, Commerce andIndustry Act (Gewerbeordnung), which in this regardis based on the EC Directive on Insurance Mediation(Directive 2002/92/EC), an insurance intermediaryis defined as an insurance broker or an insuranceagent who commercially arranges the conclusion ofinsurance contracts or assists in the administrationof such contracts. Any such person is subject to alicence requirement and has to follow considerableobligations. The obligations include, inter alia, thatof offering information on whether mediation isperformed exclusively for one insurer only and,prior to the conclusion of a contract, providingreasons for any given advice on an insuranceproduct based on a needs analysis. Thus far theserequirements have regularly not been fulfilled viasupermarket sales. An introducer, on the otherhand, is a person who simply passes details ofinterested insurance buyers on to intermediaries.Where only such an opportunity to conclude aninsurance contract is identified, the law recognisesjust an act of initial preparation and not mediation,because there is not yet a particular productrecommended. In addition, a customer wouldgenerally not expect to receive any financialplanning advice under these circumstances.

The judges sided with the plaintiff’s point of view. Itwas their conclusion that a specific insurance producthad in fact been made a focus as the supermarket,making the product pack available for purchase,had collected EUR49 to be offset against the insurance

8 Gen Re LifeHealth

Andrea GieseTreaty SpecialistGen Re LifeHealth, Germany

premium and had received a sales commission. Furthermore,by collecting the purchase price from the potential customer,the aim had in fact been to get a contract-concluding statementfrom him, so the probability that the customer would concludethe insurance contract was thereby increased. If the customerdid not wish to proceed, he had to go back to the supermarketand request a refund of the purchase price. This was deemedto be associated with an effort on the part of the consumer,which he might try to avoid by simply concluding the contract– despite possibly harbouring doubts about its content andsuitability. The supermarket chain could therefore no longerconsider itself as merely an introducer due to its clear contributionto the initiation and potential conclusion of an insurancecontract. Instead, it fulfilled the requirements of an intermediary,whose aim is to bring about the conclusion of insurance contracts.

Given this judgement, it is worth considering what otheroptions might exist for insurers and German retailers to co-operate legitimately.

The obvious solution would be for a retail company to registeras an insurance intermediary with the relevant authority andthus being regulated and allowed to sell insurance products.

While seemingly attractive in principle, this solution is lesslikely to prove easy in practice. Fundamentally, the relevantprinciples associated with authorisation and compliance aredesigned to be fulfilled by individual persons and not by acorporate entity. It is the legal representatives of corporateentities, including retailers, who must fulfil the authorisationrequirements. This is not an insignificant demand of time andcost upon the retailer and, more significantly, on the legalrepresentative, since permission is granted only once appropriateknowledge of the subject has been demonstrated by means of a corresponding test from the Chamber of Industry andCommerce. There remains an option to delegate the necessityto provide the appropriate knowledge to a nominated personother than the corporate legal representative who has beenauthorised to represent the company in this capacity. However,it is questionable whether the time and financial cost of thetraining required are worthwhile in relation to the possibleprofits that could be achieved from insurance brokering in theretail sector.

An alternative solution could be to create a situation wherebypermission and authorisation are not required.

This is the case where the mediated insurance contracts arecomplementary to the main product offered. An example iscovering the risk of breakdown and loss or damage of thegoods, such as motor polices in a car dealership or insurancefor glasses at an optician. However, for most retailers, such alimited offer is not sufficiently attractive.

Exemption from the permission requirement could also begranted if the retail company partnered with a single insurancecompany that is willing to assume unlimited liability for the

mediation activities of the retailer. Then again, in a recentcase, a retailer was prohibited from conducting this kind ofbusiness activity by way of a temporary injunction, so there isno legal certainty in this respect either.3

A third way of achieving an exemption from authorisation isfor the retail company to operate only as an introducer. In thiscase, the insurance product should not carry the retailer’sbrand and the retailer may not collect premium payments.Nonetheless, it would be acceptable to display informationleaflets on the insurance product or to set up a sales andadvice kiosk of the insurer within the premises of the retailcompany. It is questionable whether this would do enough toattract the attention of potential customers at all or whether it would be sufficiently compelling for them to pick up onlyproduct information from the retailer and still have to seek out an insurance intermediary to finalise getting a contract.Additionally, from a cost perspective, operating a kiosk maynot be financially viable as sales and advice staff need to bepresent anyway.

In summary, we can conclude that there are no simple solutionsin sight for the German retailers, despite a range of possibleapproaches. Careful consideration of the complex legalsituation is essential for insurers and retail companies that seeopportunities to generate new sales through co-operation.The scope of regulations to be taken into account – from theinsurance contract law to the intermediary law to thecompetition law – is considerable.

The German Federal Financial Supervisory Authority (BaFin)has issued a statement on the matter but did not give clearguidance on how to proceed. Fortunately, it did not prohibitsuch business activity altogether.4 In its notice of March 6, 2009it merely establishes that the quality of insurance mediation isa very important objective and that the insurance companiesare therefore required to do everything in their power toguarantee it.

It remains to be seen whether there will be any more legalprecedents on the matter that could shed light on other aspectsof the discussion. At the time of writing, a claim from anassociation for the protection of fair competition, supportedby an association of brokers, is currently pending before aGerman district court.

Endnotes1 Handelsblatt dated 10 October 2009, Markt Intern dated 9 July

2009, Exchange Plus dated 8 October 2009.

2 Wiesbaden District Court, decision of 14 May 2008; reference: 11 O 8/08; with related note from lawyer Markos Uyanik in jurisPR-VersR 2/2009, note 5.

3 Berlin District Court; Reference: 103 O 25/10; with related notefrom lawyer Dietmar Goerz in AssCompact, April 2010.

4 Frankfurter Allgemeine Zeitung dated 15 April 2009.


Andrea Giese works in Gen Re LifeHealth Germany in Cologne since 2007. She is responsible for the elaboration of reinsurancecontracts and legal questions. She can be reached at Tel. +49 221 9738 591 or [email protected].

Diabetes Underwriting Review

Kevin Uryase, FALUSecond Vice PresidentGen Re LifeHealth, North America

The World Health Organization predicts theprevalence of diabetes will increase to 366 millionpeople worldwide by the year 2030. Their regionby region predictions show an increase over 2000levels of 180% for Eastern Mediterranean, 160% inAfrica, 155% in South East Asia and 99% in WesternPacific. Meanwhile prevalence in the Americas isprojected to increase by 102% and 44% in Europe.1

The Center for Disease Control (CDC) advised thatfrom 1980 to 2007, the prevalence of diabetes inthe U.S. has tripled from 5.6 million to nearly 24million with 10.7% of the population aged over 20 and 23% above age 60 suffering the disease.2

The primary reasons the WHO gives for this epidemicis obesity, reducing levels of exercise but alsomigration from rural to urban areas and of coursethe effect of an aging population. Most of thisincrease in diabetes is due to Type 2 diabetes.

Diabetes is a metabolic disorder of insulin productionand/or utilization. With Type 1 diabetes the onset isusually before the age of 30 and results from littleor no insulin production. There is a sudden onsetand quick progression of symptoms in Type 1, whichis caused by an autoimmune destruction of insulinsecreting cells in the pancreas. About 10% ofdiabetics have Type 1.

Type 2 diabetes usually develops after the age of 40 and is associated with obesity, hypertension andhyperlipidemia but genetic predisposition and alack of exercise also contribute to insulin resistance.In Type 2 diabetes, the production of insulin is intact,but there is a resistance to insulin. Symptoms, ifany, develop slowly. Almost 90% of diabetics haveType 2 although many remain undiagnosed. Somegood news is that the Diabetes Prevention Programin the U.S. studying people at high risk for diabetes,demonstrated that it is possible to delay and possiblyprevent the disease by losing a relatively slightproportion of weight (5 to 7 percent of total bodyweight) through half an hour of physical activity 5days a week complemented by healthier eating.3

Medical costs for diabetics are approximately 2 to 3times higher than the medical expenditures for thosewho do not have diabetes. Total price for medicalbills for those diagnosed diabetic in U.S. are

• USD16 billion for direct medical costs;

• USD58 billion for indirect costs (disability, workloss, premature death);

• including expenses for undiagnosed diabetes,pre-diabetes and gestational diabetes brings thetotal cost of diabetes in the U.S. in 2007 toUSD218 billion.4

DiagnosisThe clinical signs and symptoms of diabetes arevaried and may include

• frequent urination;

• excessive thirst;

• increased appetite;

• sudden weight loss; and even

• blurred vision.

The diagnosis of diabetes can be confirmed with asimple blood test for Glycated or GlycosylatedHaemoglobin (HgbA1c) which results when glucosecirculating in the blood stream binds to haemoglobinmolecules that make up red blood cells. The levelprovides an estimate of the average level of bloodglucose over the last two to three months.

The latest diagnostic criteria5 are:

• Casual plasma glucose concentration ≥ 200mg/dl (11.1 mmol/l) with classic symptoms ofhyperglycemic crisis; or

• Fasting plasma glucose ≥ 126 mg/dl (7.0 mmol/l);or

• 2-hour post prandial glucose ≥ 200 mg/dl (11.1 mmol/l) after a 75 g glucose load; or

• HgbA1c ≥ 48 mmol per mole (or 6.5%) using atest that is standardized to the DCCT assay.

10 Gen Re LifeHealth

From 1 June 2009 the unit of measurement of HgbA1c changedfrom the Diabetes Control and Complication Trial (DCCT)standard to the International Federation of Clinical Chemistryand Laboratory Medicine (IFCC) standard. The IFCC released a consensus statement in September 20076 that agreed thatall laboratories would begin reporting their HgbA1c results tothe new IFCC standard that requires results be expressed asmillimole of HgbA1c per mole of haemoglobin (Hgb) (mmol/mol)in place of a percentage.

ComplicationsDiabetes may cause acute complications such as hyperglycemia,hypoglycemia, diabetic ketoacidosis and diabetic coma. Inaddition, there are two causes of chronic complications indiabetics. Firstly, macrovascular disease with coronary arteryand cerebrovascular disease resulting from acceleratedatherosclerosis. This results in 60% of diabetics dying of heartattack and 25% from stroke. In addition, this process ofaccelerated atheroma causes peripheral artery disease withclaudication, ulceration and gangrene meaning that diabetesis a leading cause for foot and leg amputations, secondary toperipheral artery disease.

The second cause of chronic complications are microvascularand include non-proliferative retinopathy, (microaneurysms,small dot hemorrhages and exudates in the eye usually causingno visual impairment), proliferative retinopathy (fragile newblood vessel formation often causing blindness), peripheralneuropathy (pain, burning, numbness or tingling of the feet,legs or hands) and Nephropathy (causing albuminuria andrenal failure).

TreatmentTreatments for diabetes include diet and exercise, oral medicationsand insulin injections. Use of angiotensin-converting enzyme(ACE) inhibitors may also delay the onset and progression ofdiabetic nephropathy and reduce other diabetic complications,such as retinopathy and foot ulcers. Angiotensin receptorblockers (ARB) can be used in place of ACE inhibitors for thosewho develop a cough related to the use of ACE inhibitors.Good diabetic control is defined by the American DiabetesAssociation (ADA) as diabetics with usual HgbA1c levels of lessthan 7%. Given the reporting of HgbA1c to the new IFCCstandard, underwriters will need to consider good control asbeing represented by the range 48 - 59 mmol/mol (equivalentto 6.5% - 7.5%). The non-diabetic reference range is now 20 -40 mmol/mol. The well-controlled diabetic group progressesto the development of eye disease (25% of patients), kidneydisease (50%), and nerve disease (30%). Good control ofglycemia reduces the risk of microvascular complications.

The insulin pump; an alternative diabetestreatment systemThe insulin pump, also known as continuous subcutaneousinsulin infusion therapy, is a viable option to provide patientswith multiple daily injections of insulin. The system consists ofa pump, which contains controls, a processing module and

batteries. A disposable reservoir of insulin is located inside thepump. The remaining components are a disposable infusionset, including a catheter for subcutaneous insertion and atubing system to connect the insulin reservoir to the catheter.

To receive insulin, the needle end of the catheter is insertedunder the skin and attached to the pump. Insulin from thepump travels through the catheter into interstitial tissue and isabsorbed into the bloodstream. The insulin pump pushes asingle type of fast-acting insulin to control short- and long-term glucose levels, using one of two types of doses. A bolusdose that is delivered to cover glucose levels for food recentlyeaten or to adjust a high blood glucose level or a basal dosethat is pumped constantly at an adjustable basal rate todeliver insulin needed between meals and at night. There areseveral advantages of using the pump system. For example iteliminates the requirement to administer individual insulininjections and more accurately delivers required doses. Animprovement of HgbA1c levels, less variation in blood glucoselevels and prevention of hypoglycemic episodes is seen inpatients who master the use of the pump successfully. Pumpusers find their diabetes is easier to manage and that theyhave more flexibility of what and when to eat. If their glucoselevel is high or they wish to eat, the user can simply push abutton on the pump to provide a correction in insulin dose.This can allow them to take valuable exercise without needingto eat large amounts of carbohydrates beforehand. In addition,management of diabetes using a pump to provide medicationcan help eliminate the unpredictable effects of intermediate orlong-acting insulin.

There are however some disadvantages too. Using a pump is amore expensive form of treatment. A hospital stay or full dayin the outpatient center is required initially for the user to betrained in its use. They must then become accustomed tobeing attached to the pump for the majority of the day. Theymay gain weight and diabetic ketoacidosis can occur if thecatheter is inadvertently removed for hours. Finally there is thepossibility for the pump to malfunction.

The insulin pump has undergone many revisions since thefirst, bulky prototype was developed in the 1960’s. While bythe late 1970’s an early commercial release was still the size of a house brick, today’s insulin pump can be as small as a cellphone. Most insulin pump users are Type 1 diabetics. Accordingto estimates, approximately 400,000 (i.e. 13%) of the 3 millionType 1 diabetics in the U.S. use an insulin pump.7

Use of an insulin pump in itself is not an indication of a betteror worse risk for life insurance. As always, the degree of controlmeasured via blood testing is what separates the better riskfrom the rest of the pack. The insulin pump does provide aquicker, more efficient opportunity for the diabetic to controlhis glucose level. The price for just the pump ran aroundUSD6,500 - UDS7,500 in 2008.8 Cost of supplies for the pumpwill be additional.


Underwriting Evidence To determine the mortality consequences of a diabetic, theapplicant’s complete medical records (Attending Physician’sStatement) should be obtained. The proposed insured’smedical records should contain:

• The date the applicant was diagnosed to have diabetes (thelonger an applicant has diabetes, the greater the likelihoodof diabetic complications occurring).

• The type of diabetes the applicant was diagnosed withhaving (Type 1 diabetics usually show higher relative extramortality rates than Type 2 diabetics).

• Blood studies, which show how well the diabetes iscontrolled, and whether the applicant has any othercomplicating histories associated with diabetes.

An effective method to determine how well a diabetic’s bloodsugar level is controlled is to obtain an HgbA1c with theroutine insurance blood profile. For risk assessment purposesunderwriters will use a reference HgbA1c range representing“good” control 6.1 - 6.6 and “ok” control of 6.7 - 8.0. Anapplicant achieving only “ok” control is generally not debited.

A microalbumin/creatinine ratio should also be requested, witha normal insurance urinalysis. An abnormal microalbumin/creatinine ratio can show the existence of kidney disease suchas diabetic nephropathy. Finally, an applicant’s medicalrecords should contain a recent ECG or treadmill to excludeunderlying coronary artery disease.

ConclusionThere is a striking rise in the prevalence of diabetes globally,made worse by growing obesity levels. At the same time, anincrease in testing, public awareness and a lowering of theglucose threshold considered diagnostic of diabetes has led toa significant increase in the diabetes population. An argumentcould be made that life insurers will experience improvedmortality for diabetics as a whole and the residual populationby the redrawing of the line indicative of diabetes and byincreased screening.

• The acute and chronic complications of diabetes must berecognized and evaluated with each diabetic risk.

• Alternate treatment methods, such as the insulin pump,can make it easier to control diabetes and preventcomplications.

• The HgbA1c is a valuable underwriting tool to evaluatediabetes control.

Endnotes1 www.who.int/diabetes/facts/en/.

2 http://www.cdc.gov/diabetes/index.htm andhttp://www.cdc.gov/media/pressrel/2008/r080624.htm, accessedon May 5, 2010.

3 http://health.utah.gov/diabetes/aboutdiabetes/prevention.htm,accessed May 5, 2010.

4 The Economic Burden of Diabetes, Dall T. M. et al., Health Affairs.2010;29: 297-303.

5 Diagnosis and Classification of Diabetes Mellitus, AmericanDiabetes Association, Diabetes Care, vol. 33, Supplement 1,January 2010.

6 Consensus Statement on the Worldwide Standardization of theHemoglobin A1C Measurement; (Consensus Committee, IFCC);Diabetes Care, vol. 30, No. 9, September 2007, 2399-2400.

7 Press release of the Juvenile Diabetes Research Foundation and BD(Becton, Dickinson and Company), dated January 19, 2010.

8 http://www.diabetes-blood-sugar-solutions.com/insulin-pump-cost.html.


For the last nine years Kevin Uryase has worked in the life reinsurance underwriting department of Gen Re LifeHealth. Kevin is aSecond Vice President and underwriting manager at Gen Re. He also has over 20 years of experience as a life underwriter for anumber of direct companies. Kevin received his FALU designation in 2003 and is a past president of the Hartford/SpringfieldUnderwriting Association. He can be reached at Tel. +1 860 539 8404 or [email protected].

The World Cup: ShatteredDreams and Broken Hearts?

Dr. Ian CoxConsultant Chief Medical OfficerGen Re LifeHealth Research &Development, UK


The first match of the 2010 Fédération Internationalede Football Association (FIFA) World Cup will kickoff on June 11 in Johannesburg, South Africa. In2006 the football (soccer) World Cup final attractedmore than twice the television audience of anysporting event that year, with over 600 millionviewers tuning in to watch some part of the matchin which Italy won their fourth title. With a similarlylarge audience anticipated this year, it is thereforetimely to raise the health dangers associated withwatching major football competitions and howthese may trigger an increase in claims.

Several studies have demonstrated an increase inthe rate of heart attacks around prominent sportingevents, especially previous World Cups. It has been established that acute physical or severepsychological stressors may be a trigger for heartattacks. The release of epinephrine and other vaso-active chemicals in response to anxiety, anger orother psychological stressors increase heart rate andblood pressure and cause vasoconstriction. Thesefactors may increase the risk of heart attack.

The 1996 UEFA1 European Football Championship,which was played in England, resulted in one of theearliest reports of increased risk of vascular events.A longitudinal population study looked at themortality rates of Dutch men over 45 years old forthe five days before and after the Dutch team waseliminated from this competition in a penalty shoot-out with France. The data showed an increase inmortality from heart attack or stroke in men on theday of the match compared to the rates with the sameperiod in 1995 and 1997.2 However, in a separatepaper studying the incidence of heart attack inFrance, there was no such increase.3 Perhaps thisoutcome confirms that “victory is everything”?

The 1998 World Cup in France, generated morereports on the relationship between heart attackand important football matches. On the day thatthe English team lost a penalty shoot-out toArgentina, and during the following two days,

there was a 25% increase in the rate of admissionsfor heart attacks in England. There was no evidence,however, of a similar increase when England wonor lost games earlier in the competition.4 This wouldsuggest that losing in a penalty shoot-out is especiallydangerous to health, even though one would thinkthat English fans would have become used to thisscenario over the years having lost five penalty shoot-outs in World and European football competitionssince 1990!5

Also during the 1998 World Cup, there was areported increase in the out-of-hospital cardiac arrestsin four French-speaking cantons in Switzerland,compared to the same time in 1997 and 1999.6

However, a different study of rates of heart attack inFrance during this same World Cup did not showany increase in heart attack admissions or mortality.In fact, during the day of the World Cup final, theadmissions and mortality rate was lower.7 PerhapsFrench supporters do not have the same degree ofanxiety when watching their team? Or was it thatles Blues won so easily, defeating Brazil by threegoals to nil?

There are no publications reporting similarcardiovascular events associated with the 2002World Cup hosted by Korea and Japan.

An elegant paper, published in the New EnglandJournal of Medicine, considered daily heart attackrates in the German state Bavaria, including the cityof Munich, that were reported during the 2006 WorldCup, which was held in Germany. A comparisonwas made with the same period in 2003 and 2005,during which there had been no major internationalfootball competitions.8 On days when the Germanteam was competing, the rate of cardiac emergencieswas 2.7 times the control days when Germany didnot compete. In men, this was 3.3 times the controlrate and in women 1.8 times. Temperatures throughJune and July were exceptionally high in Munich thatsummer, and these figures are adjusted to reflect this.9

Figure 1 graphically shows the increases of heart attack rateamongst local residents (visitors to the event were excludedfrom the survey) on days when the German team was playing,and highlights the relative importance of each game. The ratesof heart attack were much higher in the first two games of thecompetition but fell in the third game when Germany hadalready qualified for the knock-out stages. On the day thatGermany started the knock-out part of the competition andbeat Sweden, the rate increased again. The rate of heartattacks peaked during the next two matches; Germany beatArgentina in a penalty shoot-out to reach the semi-final, whichthey eventually lost to Italy after extra time. The incidence ofheart attacks fell during subsequent matches that had lessimportance for most German football fans.

Figure 1 – Daily cardiovascular events in the study population from May 1 to July 31 in 2003, 2005, and 2006

The FIFA World Cup 2006 in Germany started on June 9, 2006, and ended on July 9,2006. The 2006 World Cup matches with German participation are indicated bynumbers 1 through 7.

Reproduced with permission. Copyright © 2008 Massachusetts Medical Society. Allrights reserved.

2006 Matches involving Germany:

1 June 6: Germany 4 – 2 Costa Rica

2 June 14: Germany 1 – 0 Poland (qualified for knock-out stages)

3 June 20: Germany 3 – 0 Ecuador

4 June 24: Germany 2 – 0 Sweden

5 June 30: Germany 1 – 1 Argentina (4 – 2 after penalties)

6 July 4: Germany 0 – 2 Italy (after extra time)

7 July 8: Germany 3 – 1 Portugal (third-place match)

8 July 9: Italy 1 – 1 France (5 – 3 after penalties; Italy winsWorld Cup)

Most of the emergency admissions were men, for which theremay be several possible reasons:

• More men watched the matches than women

• Men became more excited than women while watchingfootball

• Due to a higher rate of underlying heart disease in men,these heart attacks were simply brought on earlier thanwould have been the case in normal circumstances.

PathophysiologyIt has been known for some time that acute stress may triggerheart attacks. Reported heart attacks increased after earthquakesin Athens, Greece in 1981,10 in Los Angeles, California in 199411

and in Kobe, Japan in 199512. A report from Israel in 1991documented an increase of heart attacks after missiles landedfrom Iraq.13 An explosion at a chemical plant in France alsoproduced an increase in heart attacks.14

Stress causes release of epinephrine, which increases pulserate and vasoconstriction and raises blood pressure. Plateletsare released, making the blood more liable to clot. Thesedevelopments may increase the risk of heart attack.

However, during football matches, other potential factors mayplay a part. During these competitions, behaviour changes,including:

• More alcohol is consumed and binge drinking is common.This has been demonstrated to increase the risk of vascularevents in men.

• Diets change, including the consumption of fattier foodswhile watching the matches on television, which may makethe blood more viscous.

The stress of watching an emotional football match may increasethe number of cigarettes that a viewer smokes within a shortperiod. It has been shown, however, that smoking bans inpublic places, such as bars, have reduced the number of heartattacks.15 This reduction has also been greater among non-smokers, suggesting that exposure to second-hand smoke isan important consideration. Since 2006, many countries haveinstituted smoking bans in bars, so this factor may be lesssignificant in these countries in 2010.


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200320052006

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0May 1 May 15 June 1 June 15 July 1 July 15 July 30

SummaryIn the past, large football competitions have been associatedwith a reported increase in heart attack rates in some countries.The 2010 World Cup may lead to emotionally charged situationswhere some people get excited possibly smoking and drinkingmore. We believe there may be an increase in heart attack ratesassociated with the World Cup, especially if there are penaltyshoot-outs. We hope that the competition is a great success andthat all our readers enjoy the matches without any ill effects.

Endnotes1 Union of European Football Associations; UEFA.

2 Cardiovascular mortality in Dutch men during 1996 Europeanfootball championship: longitudinal population study. Witte D. R.et al. BMJ 2000;321:1552-4.

3 French cardiovascular mortality did not increase during 1996European Football Championship. Trouniana L., BMJ 2001;322:1306.

4 Admissions for myocardial infarction and World Cup football:database survey. Carroll D., Ebrahim S., Tilling K., Macleod J., Smith G. D., BMJ 2002;325:1439-42.

5 England was eliminated from competition in a penalty shoot-out in the 1990 FIFA World Cup, 1996 UEFA European FootballChampionship, 1998 FIFA World Cup, 2004 UEFA EuropeanFootball Championship and the 2006 FIFA World Cup.

6 Increase of out-of-hospital cardiac arrests in the male population ofthe French speaking provinces of Switzerland during the 1998 FIFAWorld Cup. Katz E. Heart 2005;91:1096-1097.

7 Lower myocardial infarction mortality in French men the dayFrance won the 1998 World Cup of football. Berthier F., Boulay F.Heart 2003;89:555-556.

8 Cardiovascular events during World Cup soccer. Wilbert-Lampen U.et al. N Engl Med J 2008;358:475-83.

9 www.synopvis.co.uk/weather/png/mimt200607.png.

10 Psychological stress and stress and fatal heart attack: The Athens(1981) earthquake natural experiment, Trichopoulos D. et al.Lancet 321(8322)441-444.

11 Sudden cardiac death triggered by an earthquake. Leor J., (N EnglMed J 1996;334:413-9).

12 Increased acute myocardial infarction mortality following the 1995 Great Hanshin-Awaji earthquake in Japan. Ogawa K. et al. IntJ Epidemiol 2000;29:449-455.

13 Effect of Iraqi missile war on incidence of acute myocardialinfarction and sudden death in Israeli civilians. Meisel S. R. et al.Lancet, 338(8768)660-1.

14 Triggering of acute coronary syndromes after a chemical plantexplosion. Ruidavets J.-B. et al. Heart 2006;92:257-258.

15 Contribution of smoking to heart attack rates, Gen Re, RiskMatters, July 2009. http://www.genre.com/sharedfile/pdf/RiskMatters200907-en.pdf.


Dr. Ian Cox qualified from Cambridge University and The Royal London Hospital in 1976. He worked in hospital medicine andresearch until 1985 when he moved to family practice. He has worked in Insurance Medicine for direct offices since 1993 and withreinsurance companies since 1998. He can be reached at Tel. +44 20 7426 1803 or [email protected].

International

> Gen Re LifeHealth, United Kingdom, organised a Seminar in Dublin, Ireland, on March 3,2010. The seminar considered developments in Income Protection, Group Critical Illnesscontracts throughout the world, the practical issues to consider when using tele-underwriting and the use of Bio-Pyscho-Social techniques in managing IP claims.

> Gen Re LifeHealth, United Kingdom, hosted a client seminar in Edinburgh on March 17,2010. The guest speaker from Gen Re LifeHealth in South Africa, Lauren Hulett, presentedon Lower Back Pain – the Underwriting and Claims Challenges.

> Gen Re LifeHealth Research & Development, hosted its annual Actuarial Course fromApril 11 - 16, 2010 in Cologne, Germany. Participants representing 19 different countriesfrom Asia, Europe, Middle East and South America contributed to lively discussions in thePrimary Insurance Management Exercise (PRIME), a computer assisted learning exercisewhich demonstrates some of the decision making processes involved in operating aninsurance company. Further topics discussed in presentations and interactive workshopsincluded risk management, reinsurance, actuarial modelling, issues related to productsthat cover biometric risks such as disability, critical illness and long-term care as well asaspects of preferred life concepts.

> Gen Re LifeHealth, United Kingdom, held their fourth Risk Matters Symposium on April 19,2010. The purpose of the event is to bring together senior opinion makers within the lifeinsurance industry to discuss a specific issue that the industry is facing. The symposium’skeynote presenter was Dr. Patrick Nolan, Chief Economist of the independent think-tank,Reform, who gave his view on where things may be headed post the UK’s general electionin May 2010.

North America

> Drew King, President, JHA, delivered a presentation on the current Group Insurancemarket and offered his forecast to producers and group representatives for Sun Life inSeattle, Washington on April 27, 2010.

> The Gen Re LifeHealth Advisory Council meeting was held in Scottsdale, Arizona May 3 - 5, 2010. This discussion workshop with presentations is held annually for selected key clients. Representatives from 22 companies, comprised of senior actuarial andunderwriting officers are participating in this year’s meeting. Gen Re LifeHealth presentersconsisted of Steve Mannik, President, providing an overview of the industry and globalGen Re; Jim Greenwood, Senior Vice President discussed the Life Division’s products andservices; an Actuarial panel consisted of Vadim Marchenko, Philip Velazquez and JeremyStarr discussed mortality improvements, post-level term period findings, product trendsand capital market cost, availability and outlook; Thomas Ashley, Chief Medical Director,discussed alternative medical tests. Outside speakers were Laura Bazer, Vice President,Senior Credit Analyst at Moody’s discussing the outlook of the economy and the impacton the insurance industry, and Charles J. Vinicombe, Partner at Drinker Biddle Reath,discussing the Life Settlement Industry. All attendees participated in a workshop discussingrelevant topics addressing industry issues.

> Barry Eagle, Vice President, Marketing, presented at three Critical Illness “Boot Camps” inDallas, Houston and Anaheim May 11, 12 and 18, 2010 on the History of, and need for,Critical Illness Insurance as a companion sale for producers regardless of their productspecialty.

Inside Gen Re LifeHealth

Client Seminars


4

Actuarial Course 2010 in Cologne.

Industry Meetings4


International

> Gen Re LifeHealth, South Africa, was proud to be a platinum sponsor of the 29thInternational Congress of Actuaries that was held in Cape Town during March 2010and attended by more than 1,500 delegates. Gen Re LifeHealth staff contributedeight papers to this congress. Louis Rossouw, Singapore, presented a paper entitled“How much life insurance is enough? A utility-based approach”. Andres Webersinke,Germany, spoke about “The expanding role of the actuary” with particular emphasison evidence-based underwriting. Wolfgang Droste, Hong Kong, presented “LongTerm Care case studies” as well as on “Risk management in medical expenseinsurance”. Paul Lewis, South Africa, discussed “Data availability” and James Louw,Australia, presented the findings of “A Critical Illness experience study in NewZealand”. Disability experience and the economy were covered by two separatepresentations. Eddy Fabrizio, Australia, presented on “Economic issues affectingdisability” whereas Karl Schriek and Paul Lewis, both South Africa, presented on“The link between disability experience and economic conditions in South Africa”,which was awarded the “Best African Paper” prize.

North America

> Cecil Ramotar and Michael Clift spoke at the April 11, 2010 meeting of theAssociation of Home Office Underwriters (AHOU) in San Antonio, Texas. Cecilspoke about Auto Racing and Michael spoke about Mountain Climbing. LauraVecchione, Medical Director also spoke at the meeting about Breast Cancer.

> Stephane Julien, spoke on April 13, 2010 at the Life Insurance Conference inWashington, D.C. about Current Trends in Life Insurance Products.

> Barry Eagle, Vice President, Marketing, spoke at the LIMRA, LOMA, SOA and ACLI2010 Life Conference April 13 - 15, 2010 in Washington, DC on Critical IllnessInsurance as a companion sale or combination sale with Life Insurance.

> Barry Eagle also spoke at the Benefits Selling Expo April 19 - 21, 2010 inWashington, DC on Critical Illness Insurance as a “Gap Filler” in Benefits Programs.Barry, along with Steve Rowley, spoke at the Workplace Benefits Renaissance inNashville March 24 - 26, 2010 on Critical Illness Insurance as a gap-filler in WorksiteMarketing Programs.


Andres Webersinke atthe International

Congress of Actuaries in Cape Town.

Steve Rowley

Barry Eagle

Wolfgang Droste

Louis Rossouw

Mark Your Calendar

International

> Gen Re LifeHealth, United Kingdom, will be hosting underwriting training in Bristol onJune 15, 2010. Dr. Chris Ball, Consultant Medical Officer, will be presenting on “Hepatitisand Inflammatory Bowel Disorders”.

> Jules Constantinou, Head of Marketing at Gen Re LifeHealth, United Kingdom, will give apresentation on “Social Care in the UK” at the Health and Care Conference in Newport,Wales on May 13, 2010.

North America

> Steve Rowley, Vice President, Risk Management, will be presenting at the LIMRA, LOMA,SOA, DI and LTC Meeting September 22 - 24, 2010 in Orlando, Florida as part of a paneldiscussing the subject of Managing Existing Blocks of LTC, including reporting on a majorindustry survey that Gen Re has initiated looking at rate increase filings.

> Barry Eagle, Vice President, Marketing, will be speaking at the LIMRA, LOMA, SOA, NACIIForum September 21 - 22, 2010 where he will provide results of the 2010 Gen Re NACIISurvey on Critical Illness in the U.S. market.

> Thomas Ashley, Chief Medical Director, will be speaking on bipolar disorder at the South Eastern Home Office Underwriter’s Association (SEHOUA) in Hilton Head, South Carolina on June 23, 2010.

> Barry Eagle, Vice President, Marketing, will be presenting on Critical Illness Insurance at the South East Actuaries Meeting June 16 - 18, 2010 in Palm Beach, Florida with thesession titled “What Do Actuaries and Companies in 54 Countries Know that You Need to Know?”.

4

Our Professionals

International

> Paul Lewis and Karl Schriek, Gen Re LifeHealth, South Africa, were awarded the“International Congress of Actuaries (ICA) 2010 Best African Paper” prize. The paper looksat the link between disability experience and the economy. It includes a statistical analysis ofthe impact on South African disability experience due to changes in economic conditions.

> Dr. Detloff Rump, Regional Chief Underwriter, Gen Re LifeHealth, Hong Kong, publishedan article in the March 2010 issue of the Journal of the Association of Insurance Medicine ofJapan entitled “Epidemiology – Changes in Disease Patterns”. It highlights the effect ofchanges in epidemiology and related scientific fields in four areas – infectious diseases;malignancies – metabolic abnormalities and chronic cardiovascular disorders; and examinesthe potential impact of future developments on the life insurance industry.

North Amercia

> Sue Hendrix has joined JHA in South Portland, Maine as an Individual Disability Income underwriter.

4

Gen Re LifeHealth18


Dr. Chris Ball

Jules Constantinou

Drew King

Karl Schriek

Paul Lewis



Publications

International

> Risk MattersMarch – This LTC Quarterly Digest concentrates upon both the non-motorsymptoms, whose management can reduce the likelihood of a long-term care claimor the length of claim, and the recent research suggesting changing patterns ofmortality in Parkinson’s Disease patients.

March – Employment Support Allowance This issue looks at the results of the UK Government’s assessments for theEmployment Support Allowance based on the Capacity of Work Assessment.

April – Skin SterolThe measurement of cholesterol in the skin, or “skin sterol”, has been put forwardas a candidate to eliminate the need for testing blood for lipids and avoiding theinconvenient requirement for examinees to fast prior to the test. This edition of Risk Matters examines the claims for this test and its potential for cardiovascular risk assessment.

> Risk Matters OceaniaMarch – This issue covers Guaranteed Acceptance Insurance – We've got it covered;New Zealand Trauma Investigation: A key finding; COMET Program 2010 – ProtectYour Future; and Gen Re’s Upcoming Events.

April – This time, we draw our attention to the Australian taxation implications ofKey Person Insurance; Lump Sum & DI Financial Analysis for Financial Planners as a new COMET Elective; the update of our Underwriting Guidelines and Standards2010; What’s in the latest update to CLUE4; and the COMET courses in April - June2010.

North Amercia

> Gen Re LifeHealth recently released the 2009 Medicare Supplement MarketSurvey, the first comprehensive survey focused on the Medicare Supplement marketsegment. There were 49 participating companies, representing over USD10.8 billionin annualized Medicare Supplement premium and 57% of the total Med Suppmarket premium as reported by the NAIC. The survey encompassed questions abouteach participating company’s background, experience and expectations, challenges,products and marketing, and operations. Future studies will track changes in thebusiness over time.

> JHA, the Disability and Group Life division of Gen Re LifeHealth, North America, hasreleased the results of the following annual U.S. benchmark research studies: 2009U.S. Group Disability Market Survey, 2009 U.S. Group Life Market Survey and2009 U.S. Individual Disability Income Market Survey. These surveys collect andreport sales and inforce premium results for their specific markets. Participatingcompanies receive the detailed reports.

> The following profit studies were also released: 2009 U.S. Group Disability ProfitStudy and 2009 U.S. Group Life Profit Study. The final reports show aggregateindustry results of profitability for their respective markets. Full reports are availableto participating companies only. Summary information for the JHA research isavailable at www.jhaweb.com.

4

The people behind the promise®

Kölnische Rückversicherungs-Gesellschaft AGTheodor-Heuss-Ring 1150668 Cologne, GermanyTel. +49 221 9738 0Fax +49 221 9738 494www.genrelifehealth.com

Editors:Andres Webersinke, [email protected] (responsible)Ross Campbell, [email protected] King, [email protected]

Photos: © istockphoto: Katie Nesling, Don Bayley,Andrea Gingerich, Pamela Burley; Mauritius Images/Creatas

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What does Risk Feel Like? Insights from Behavioural Economics Part II

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Transcript of What does Risk Feel Like? Insights from Behavioural Economics Part II