Underwriting the unvaccinated: rating risk in a pandemic

Olivia de Pont, senior associate, MinterEllisonRuddWatts

Aperson’s COVID-19 vaccination status and how they may be treated as a result has become an increasingly controversial topic. Among other issues, it raises the question of how insurers may take vaccination status into account when underwriting life and health insurance cover.

Some American employers, such as Delta Airlines, have increased the health insurance premiums payable by unvaccinated employees. Legal and General, a UK insurer and financial services provider, has said that high-risk applicants are having their applications for new life insurance postponed for 12 months unless they provide proof of vaccination.

A New Zealand insurer, Partners Life, has also commented that it may take into account insureds’ vaccination status when underwriting health and life insurance. However, rating applicants’ and insureds’ risk based on vaccination status is not a straightforward exercise. Challenges for rating risk based on vaccination status

There are a number of obvious reasons why an insurer might take into account vaccination status when underwriting life and health cover. Insurers routinely take into account other behaviours and status when underwriting these types of risk, such as whether an applicant smokes and how much an applicant drinks.

Vaccination status may be taken into account as another indicator of risk. Being vaccinated against COVID- 19 may also correlate with an increased willingness to take other vaccines, or take medical advice and assistance more generally, thereby reducing an individual’s exposure to other diseases and health risks.

An increase in premiums for the unvaccinated may also encourage applicants to get vaccinated, which may reduce the overall risk to the population and an insurer’s client base.

However, this also raises the question as to whether insurers should be taking into account other vaccinations an applicant has. It also raises questions about whether it is worth modifying underwriting practices at all in circumstances where the variant of COVID-19 that is currently dominant is both less responsive to the vaccines currently available and may be less likely to result in serious illness or death than earlier variants. Other challenges for underwriters to consider include:

Unlike chronic health conditions, the risk presented by COVID-19 may initially be high and decline over time as less virulent strains of the virus take over and vaccination rates increase. It may not be worth making long-term changes to how risk is underwritten in circumstances where the risk posed by COVID-19 may be relatively short-term compared to

permanently dangerous diseases such as polio and measles.

Vaccination status does not, on its own, define an individual’s risk of becoming seriously ill or dying of COVID-19, which is influenced by other comorbidities and the likelihood of being exposed to the virus – which may be influenced by overall vaccination rates in a particular area.

If vaccination levels in a particular area are high, then there may be little to be gained by adding vaccination status as a rating factor.

If vaccination status is relevant to underwriting decisions, should immunity gained through a prior infection also be relevant?

If regular booster vaccines are required to maintain immunity, then vaccination status would need to be reviewed regularly, increasing an insurer’s administration costs. Alternatives to premium increases

There are a number of alternatives to premium increases based on vaccination status that insurers may consider. Insurers could consider an overall increase in life and health insurance premiums, regardless of vaccination status.

This would be less difficult to implement than differentiating between applicants and insureds based on vaccination status and may help an insurer prepare financially for the possibility of future pandemics. However, unless such an approach is adopted across the industry, an overall increase in premiums may disadvantage an individual insurer, as vaccinated applicants may be able to obtain cheaper insurance elsewhere.

Insurers may also, as suggested by Willowgrove Consulting’s JonPaul Hale, address the COVID-19 risk by offering product discounts for the vaccinated or loadings for the unvaccinated.

They may consider policy exclusions and term limitations for the unvaccinated and reducing exclusions, such as waiting periods, for the vaccinated or offering rewards points. For unvaccinated applicants with other comorbidities, insurers may decline cover altogether. Conclusion

The relevance of vaccination status to underwriting risk raises complex issues as to how to fairly rate risk in a pandemic, in circumstances where the nature of the risk is constantly evolving. We may be more likely to see policy exclusions for the unvaccinated and incentives for the vaccinated to address the current risk, with overall premium increases for all insureds in the long-term.

The increased costs to insurers occasioned by the pandemic and the risk of new infectious diseases emerging in future may warrant a re-think of risk for health and life insurance more generally.

Keeping kiwis in the know about vehicle safety

Here at Smith&Smith®, we’re on a mission to help keep your clients safe on our roads.

As advanced driver assistance systems (ADAS) become more common in vehicles worldwide and the safety technology becomes smarter, it is even more important that vehicle owners and repairers understand just how complex these systems are, how they improve road safety and in turn help save lives.

But it doesn’t stop there, it’s also important to know that many of these features must be maintained to keep working effectively. That’s where we come in. When your client comes to us for their windscreen replacement and their vehicle is fitted with ADAS, a recalibration of their forward-facing windscreen camera is often needed. So, what exactly is ADAS?

Advanced driver assistance systems (ADAS) are a range of technological features designed to increase the safety of vehicles and road users. Through electronics such as cameras and sensors, the driver is alerted to obstacles and hazards so they can react accordingly. Where the driver doesn’t react in time, some features can also take control of the vehicle to avoid an incident.

What are some common ADAS features?

If you’ve driven a modern vehicle, you will likely be familiar with these.

• Adaptive cruise control. This works above a certain speed to automatically maintain a safe distance from the vehicle ahead. It will maintain the vehicle’s cruising speed (determined by the driver), adjusting it according to what’s happening ahead.

• Lane keeping assist, also known as lane departure warning. This warns the driver when the vehicle is drifting out of its lane without use of the indicator. • Autonomous emergency braking. Occurs as required to avoid a collision with something in a vehicle’s path.

It will alert the driver to brake, before automatically applying the brakes if the driver has not responded in time.

• Park assist. Using a range of sensors, park assist informs the driver whether a space is suitable to park in. Alerts indicate the proximity of other vehicles, walls, or hazards. Park assist can often control the vehicle’s steering wheel, and some systems can control the accelerator and brakes to park the vehicle for the driver.

What is a windscreen recalibration and how will my client know if they need one?

A windscreen recalibration is a technical process that checks the alignment of the forward-facing camera of a car, which is often located behind the windscreen, so that its ADAS can work with the camera as the manufacturer intended. Even a small deviation can negatively influence the potentially life-saving features. It’s a bit like having out of focus contact lenses while driving.

When your client books with us, we will ask them a few questions to help identify whether a recalibration is needed. Our highly trained technicians will also be able to answer any questions on the day of their appointment. So why choose Smith&Smith® to look after your clients?

The safety of your client and their vehicle is at the forefront of what we do. We have a dedicated research team at Belron International who keep up to date with the latest vehicle manufacturer developments in vehicle glass and windscreens. They invest over €2m a year, which goes into continuously improving our knowledge and developing world class tools and processes.

We have over 60 corporate and Authorised Dealer locations, with most being able to offer windscreen recalibration services. And we are looking to expand this even more in 2022.

We’re also committed to sharing our findings and knowledge with our partners and customers industry wide. We’re also sharing our findings with AGSA NZ (Auto Glass Safety Association NZ) and are encouraging our competitors to adopt the same safety standard. Recalibration requires specialist tools and training so it’s important that you only trust an expert. Partner with us today and let’s help keep your clients safe on our roads.

Scan this QR code to connect with us. Alternatively, please contact:

Doug Waters Business Development Manager commercial.team@smithandsmith.co.nz