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Insurance industry innovations.

It's true--some may not immediately think of the insurance industry when they think about product innovation. But, among other things, NUL is trying to change that stigma. From a breast cancer tumor calculator to health care ministries to annuity mobile apps, the insurance industry, whether deservedly recognized or not, is an innovation juggernaut. And we are here to bring you these top innovations in our inaugural insurance industry innovations spotlight. These are just a few of the industry's innovations that caught our eye recently.

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Life Insurance

The American College's RICP program

With more than 10,000 baby boomers turning age 65 on a daily basis since 2011, retirement income planning has taken on added urgency among life insurance and financial services professionals. The growing pool of boomers exiting the workforce has prompted many advisors to complement their traditional focus on asset accumulation with expertise in asset decumulation--the drawdown of retirement accounts.

Enter The American College's Retirement Income Certified Professional (RICP) designation. Launched in April of 2012, the continuation education program boasts a rigorous three-course curriculum to helps advisors master retirement income planning.

Why a designation tailored to this specialty? Don't other programs offered by The American College, including the Certified Financial Planner (CFP) and Chartered Financial Consultant (ChFC) programs, also cover income planning? Indeed they do, but not in the depth provided by the new curriculum.

"Unlike other coursework offered through the American College, The RICP program is laser-focused on retirement income," says Jamie Hopkins, an assistant professor of taxation at the school. "It's all about best practices and techniques for drawing down assets, be they annuities, life insurance, IRAs or Social Security."

Students enrolled in the RICP coursework gain proficiency in a range of areas unique to the specialty. Among them: retirement portfolio management techniques; mitigation of plan risks to the proper use of annuities; employer-sponsored benefits; and determining the best Social Security claiming age.

The program's three courses include (1) "Retirement Income Process, Strategies and Solutions;" (2) "Sources of Retirement Income;" and (3) "Managing the Retirement Income Plan." Most advisors will require about a year to complete the program, according to the college.

In selecting the RICP program for inclusion in our May feature on innovations, the NU editorial staff considered not only the depth and breadth of the coursework, but also the high-tech method of delivery. The instruction is provided through online video lectures and interviews -a departure from the traditional college textbook--plus supplemental material and a comprehensive study guide.

And because of the digital component, coursework can be easily and quickly updated to integrate new developments that might dovetail with the instruction. Example: a video focusing on President Obama's proposal, debuted at his State of the Union Address earlier this year, to offer a retirement savings program for workers whose employers don't offer a 401 (k) plan.

For continuing-ed students desiring coursework that better reflects what's happening in the real world, such curriculum developed on-the-fly is about as good as it gets.

The MetLife wall

To help gain a competitive edge, MetLife is investing more than $300 million in information technology initiatives that, the company promises, will "transform the customer experience" and fulfill unmet needs. Among solutions resulting from the IT effort is the "MetLife Wall," a Facebook-like software app that aims to ease and speed interactions between service agents and customers.

To that end, the software platform provides a complete timeline of customer's transactions--claims, records, status, etc.--enabling MetLife agents to quickly retrieve and cross-sell solutions (e.g., marketing auto or homeowner's insurance to life insurance policyholders). To strengthen the data capability, the company is also looking at integrating other sources of customer info, including social media and mobile apps.

Built on a MongoDB open-source (NoSQL) document database, the MetLife Wall gathers data from more than 70 legacy systems. The software connects to six application servers in two data centers and twelve database servers carrying a storage capacity of 24 terabytes.

The database houses digital records of all U.S. MetLife customers--an amount totaling more than 50 million JavaScript Object Notation (JSON) documents. The company's objective now is to extend the software's functionality to international customers and other languages.

The MetLife Wall integrates into one data record, and makes viewable on a single screen, "all related and linked customer information." Result: a "360-degree view" of policyholders, the software displaying interactions with different customer-facing reps, including call center and field agents.

MetLife has paired the Wall with an enterprise-wide implementation of, a cloud-computing based customer relationship management solution.

The objective is to consolidate all data onto two screens: serving as the platform for sales and service transactions; and the MetLife Wall retrieving customer records from the company's application servers.

What else in the works? MetLife now is looking to create "next-best action models" that will guide agents on how best to work with clients and prospects. The company's IT team has additionally used the software platform's MongoDB chassis to build models for predicting attrition. The insurer is also looking to convert the Wall into a "bi-directional application capable of updating legacy systems of record."

Munich Re's breast cancer tumor calculator

Faster underwriting. More favorable policy ratings. Lower premiums. Increased sales.

These are among the promised benefits of a breast cancer tumor calculator that Munich Re rolled out last October to its primary clients: life insurance carriers whose policyholders Munich Re covers through reinsurance treaties with the companies. As part of the agreements, Munich Re avails the carriers' underwriters of its EDGE Life and Disability Income underwriting manuals, which have been revised to better reflect the progress that medical science has made in diagnosing and treating breast cancer.

The latest iteration of the manuals include a breast-cancer tumor calculator--one of three now available in the product (the others include prostate and cutaneous melanoma cancer calculators). Accessed via proprietary software developed by Munich Re, the calculator guides underwriters through a series of drop down boxes and questions to help arrive at an appropriate underwriting rating based on the nature and severity of a policy applicant's breast cancer tumor.

Among the queries: the type of cancer, age of diagnosis, duration of cancer since diagnosis, and gender (most -though not all--of breast cancer patients are women). The software calculator will also inquire about the size of a "T1" or "T2" tumor (Munich Re only underwrites these early stage cancers), whether the cancer has metastasized and what evidence points to the spread of the cancer (e.g., a chest x-ray).

If the application isn't declined, the software will produce a rating and an appropriate premium can then be attached to the proposed policy. "The software's fields can be quickly completed," says Robert Lund, a vice president and medical director, at Munich Re. "It's a pretty slick app."

Though lean, the breast cancer tumor calculator draws on extensive research demonstrating that more breast cancer survivors are insurable, thus enabling carriers to offer policies at standard rates or use table ratings when standard is not possible. Thanks to the earlier diagnoses and improved therapies that medical technologies have enable in recent years, the "expression of increased mortality associated with cancer tends to come later" than was true in prior years, according to Lund.

Upshot: There is now little advantage to postponing underwriting to track the progress of an early stage breast cancer because the life expectancy of a T1 or T2 patient is roughly on par with that of women who are free of the disease. -* >

"The results of our research show that we can make favorable policy offers much earlier than previously was the case," says Lund. "The breast cancer tumor calculator has been very well received by the underwriting community."

Health Insurance

Minimum essential coverage

People in the benefits market have been talking about a mysterious new breed of "skinny health plans" for years. Now Fringe Benefit Group has come out with a real-world example: A plan that may not help an employer meet the Patient Protection and Affordable Care Act (PPACA) requirements for providing "affordable" coverage with a "minimum value," but do help the employer meet the PPACA requirement to provide "minimum essential coverage."

Access to MEC--or benefit plans tailored to shield workers from the PPACA individual mandate penalty--can help moderate-income part-time workers and hourly workers avoid paying the PPACA individual mandate penalty. Offering MEC can also give an employer some protection against PPACA employer mandate penalties.

PPACA calls for the Internal Revenue Service to impose two types of penalties on large employers with weak health benefits. The first penalty is a payment equal to $2,000 times the number of full-time workers, minus $60,000, for employers that fail even to provide MEC, if any employee without access to MEC gets coverage from a PPACA coverage.

The second penalty applies to employers that offer MEC, but not access to affordable coverage that covers at least 60 percent of the actuarial value of the PPACA "essential health benefits" package. That penalty is equal to just $3,000 times the number the number of full-time employees who sign up for PPACA exchange coverage and end up qualifying for PPACA premium tax credits.

Fringe Benefit Group believes its new plan can help employers avoid paying the first type of penalty. The company was previously known for selling mini med plans, or limited benefit health plans, designed for part-time workers and poorly paid hourly workers. PPACA gutted the mini med market by banning lifetime and annual benefits limits, and by requiring every health insurance policy to cover at least 60 percent of the actuarial value of an extensive essential health benefits package.

Fringe Benefit Group is trying to offer a product aimed at the kinds of employers and workers that were using the mini med coverage. The MEC plan would consist mainly of a self-insured MEC plan that covers 100 percent of the cost of the basic PPACA preventive services package. It's offering the MEC plan in a package that includes a variety of other products, such as hospital indemnity insurance.

Health care sharing ministries

Modern health care sharing ministries have been around since the 1960s, but the Patient Protection and Affordable Care Act PPACA has cast them in a bright new light. The PPACA individual "shared responsibility" provisions call for the IRS to impose a penalty on many individual taxpayers who have no health insurance, or too little coverage, starting this year.

The U.S. Department of Health and Human Services (HHS) has decided that belonging to a health care sharing ministry is one of the ways an individual can get out of paying the penalty without having to buy what HHS would normally classify as a minimum level of health coverage.

Though innovative, the trend is nothing new. Religious groups have been paying for members' health care for thousands of years.

A modern health care sharing ministry, however, is a nonprofit organization for people who want to share medical expense burdens with others with similar beliefs, according to the ministries' trade group, the Alliance of Health Care Sharing Ministries. The companies in the Alliance of Health Care Sharing Ministries are following a path blazed by Old Order Amish Church Fund. Today, the ministries are helping 260,000 people share about $180 million per year in medical expenses.

The ministries are not insurance companies, however, and cannot guarantee the payment of any medicals. Instead, members agree to try to pay a certain amount of other members' bills each month.

A ministry's managers send members a monthly newsletter listing the members who need help. The members who can help then send cash.

One alliance ministry, Samaritan Ministries International, serves about 30,000 households, and those households help each other directly with about $86 million in medical bills per year, managers say. The maximum monthly share for a family at that ministry is $370. The maximum "publishable amount" is $250,000. The ministry also has an extra "Save to Share" program that helps members with catastrophic claims over the $250,000 threshold. But the members can do more than cut checks. "They also pray for one another and send notes of encouragement," Samaritan Ministries says.

Another ministry, Christian Care Medi-Share, says on its website, "Medi-Share is NOT INSURANCE.... It's Christians Helping Christians--and It Works!" Christian Care offers a disability cost-sharing program as well as medical bill sharing program.

This year, the alliance says, one source of excitement will be seeing how exactly the IRS implements the health care sharing ministry exemption from the PPACA individual mandate penalty.

Virtual reality benefits

Routine access to coverage for virtual reality-based health care is an innovation that has been "coming any day now" for years. Researchers have been studying the use of virtual reality in efforts to treat phobias and other behavioral health problems for some time now.

In 2011, in San Diego, the Virtual Reality Medical Center said it was having good luck with getting insurers to pay for virtual reality behavioral health therapy. But other VR therapy providers say patients may have a hard time getting plans to pay for VR care.

Magellan Health Services, a behavioral health benefits manager, says in a guide for care providers updated this year that it views VR therapy as "promising." The company says it would like to see more studies of the effects of VR therapy. But Magellan concludes that VR therapy is still "investigational." In the area of post-traumatic stress disorder treatment, for example, "one small study ... showed that patients receiving virtual reality-graded exposure therapy had greater improvement in PTSD symptoms after 10 weeks of treatment than those receiving treatment as usual," Magellan treatment evaluators write. "Two other studies found that relative to their pretreatment self-reported symptoms of PTSD, patients treated with [virtual reality exposure] reported a significant reduction at post-treatment." But Magellan is not yet ready to cover VR sessions the way it would a prescription for lithium.

VSP, a vision benefits provider, may have given VR benefits a nudge forward in January by agreeing to cover the frames and prescription lenses that go along with the head-mounted Google Glass computer. Many labs and clinics have already been studying ways to use virtual reality systems in medicine but the fact that VSP--a well-known vision benefits provider--has something to do with VR hardware might start to give health insurers more familiarity and comfort with the idea of VR medical benefits.


Contingent deferred annuities

Though not considered a new innovation, CDAs have experience a recent spike in interest, both from consumers and agents. Investors flock to CDAs because it's designed to offer protections similar to those provided by a guaranteed lifetime withdrawal benefit (GLWB), but does not require the purchase of an underlying variable annuity. Basically, investors get a product that provides an annuity-type guarantee without having to buy an annuity.

Designed to offer longevity risk protection, the CDA also offers investors protection from the ordinary income tax that they would normally pay after withdrawals from traditional annuities.

It is linked to the performance of an investment account that is not a life insurance company separate account. To some investors, it's a win-win.

These are "the Silicon Valley of the annuity world," said Stan Haithcock, also known in the financial world as Stan the Annuity Man. "Most people hate the sound of the word 'annuity,' but they like guarantees." What makes the CDA innovative is that is allows investment in a real portfolio with an attached income guarantee that can be cancelled at any time.

According to a study by Milliman, Inc., the inclusion of a CDA in the investor's portfolio improves the desired retirement income stream by: guaranteeing the funding of essential living expenses for life, reducing the probability of a shortfall in desired income, delivering a higher investment portfolio IRR, increasing overall cash flow and increasing legacy benefits.

But like most investments, there are weaknesses. "The only downside, in my opinion, are the current limitations of the portfolio holdings you can have with an attached CDA strategy," said Stan. And while progress has been made on both the tax and regulatory front with regards to CDAs, the product is still striving for market acceptance. Even so, the CDA is an annuity unlike any other, and consumers have--albeit slowly--started to take notice.

The U.S. Department of Health and Human Services (HHS) has decided that belonging to a health care sharing ministry is one of the ways an individual can get out of paying the penalty without having to buy what HHS would normally classify as a minimum level of health coverage.

Annuity mobile apps

According to Pew Research Center, 58 percent of American adults have a smartphone and 42 percent own a tablet computer. Additionally, 43 percent of cell phone users have used their smartphone to download a mob ile app, an amount that doubled from 2009 to 2012. For many insurance and financial services companies, innovation translates to digital products or services.

CUNA Mutual Group is no exception. The company recently launched its ZONE annuity app to present investment options for CUNA Mutual Group's new, registered index annuity, MEMBERS[R] Zone Annuity, using easy-to-understand terms and visuals. It also helps advisors get a better grasp of features associated with the product. To say it has helped is an understatement.

Mobile application usage among licensed advisors increased more than 400 percent in the last quarter of 2013, and the bounce rate was reduced by more than 50 percent from existing apps. Sales of the MEMBERS Zone Annuity reached $22 million in the first month after launch, with first-year sales exceeding target by more than 300 percent for 2013.

Lincoln Financial has also gotten into the game with the launch of its "Lincoln Annuity Visualizer," a web-based app developed to help advisors "visualize" and demonstrate their clients' needs for retirement income. The app incorporates hypothetical situations and case studies to help wholesalers and advisors quickly explain the various options available to their clients.

Even with these innovations, the life and annuity industry remains behind the times. A recent Celent research study noted that while the startup phase of P&C consumer-facing mobile apps has progressed rapidly, the startup phase for life insurers will take much more time to develop. With more and more consumers--especially those in the higher income bracket--downloading and using mobile apps, and more and more using mobile apps to manage their banking and personal finance activities, annuity issuers may want to increase their presence in the underserved annuity mobile app sphere.

Deferred income annuities

DIAs apply the concept of a longevity annuity to better meet the needs of pre-retirees for guaranteed income when they retire. They allow buyers to convert a lump sum into a pension-like series of payouts for life. They work in contrast to an "immediate" annuity, which starts issuing checks almost instantaneously, a deferred annuity requires owners to pick a start date for payments--usually from 13 months to 40 years or longer.

"Longevity annuities were a product that academics loved, but no one really bought," said Dave Simbro, senior vice president of life and annuity at Northwestern Mutual. "Addressing DIA needs of a younger market also created the opportunity for more innovative product design." Thus, we welcomed the deferred income annuity.

According to the LIMRA Secure Retirement Institute, year-over-year sales growth of the product jumped 113 percent in 2013. Though the DIA is still a diminutive player when compared to the total premium volume of the annuity industry as a whole, there remains rapid growth--and confidence in the future of the product.

"DIAs are going to take more market share from income riders because they are easy to understand by the client -and the agent--they are transparent and efficient. In addition, the big carriers play here ... New York Life, Guardian, Mass Mutual, Northwest Mutual, Lincoln, etc. The name recognition game alone will drive the train," said Stan Haithcock.

"The innovation that exists in deferred income annuities today comes from the product's flexibility," said Ross Goldstein, managing director, New York Life. The company offers the "Gauranteed Future Income Annuity," which affords consumers the flexibility around how they fund the product, the ability to change their income start date, and riders that provide a money back guarantee, inflation protection, and the ability to accelerate

payments if cash is needed for an emergency.

New York Life pioneered the innovation in this category in 2011 by turning what was once mistakenly referred to as "longevity insurance" into what pre-retirees now see as their own personal, pension-like product offering higher payouts than any other income strategy on the market, and one that provides a more sustainable, fulfilling retirement.
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Author:Hersch, Warren S.; Bell, Allison; Holbrook, Emily
Publication:National Underwriter Life & Health
Date:May 1, 2014
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