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  • January 2023
  • 5 minutes

Right to Underwrite: Navigating an evolving global landscape

  • ​Gabrielle Wood
  • Nicky Virgo
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Right to Underwrite
In Brief

The emergence of consumer-focused regulations regarding data privacy, the use of big data/artificial intelligence (AI), the use of genetic test results, and the Right to be Forgotten (RTBF), among other factors, challenge the ability of insurers to profile risk and provide differentiated offerings. This article explores this evolving landscape, including trends and outcomes by jurisdiction, and offers suggestions for continued monitoring and engagement.

While intended to prevent discrimination in insurance offers, such efforts can also inadvertently limit consumers’ access to coverage. Amid increasing use of data and technologies, the issue continues to grow more complex.

A look at how the right to underwrite is being regulated in various jurisdictions around the globe can help to provide insights into where the industry may be headed and how insurers and regulators might navigate a path forward.

Proxy Discrimination, Big Data, and Genetic Information in North America

A significant development in the U.S. is related to proxy, or what may be considered unfair discrimination, driven by concerns focused on disparity in treatment between protected classes. Specifically, issues regarding proxy discrimination can involve the use of driving records, criminal conviction records, credit scores, and any form of facial recognition. Although discussions regarding proxy discrimination are currently focused in the U.S., they will likely expand to other jurisdictions.

In 2021, the State of Colorado passed a law that limits the use of non-traditional underwriting variables and establishes the conditions under which algorithms may be used in insurance. Insurers must develop a risk framework to test and continuously validate models using external consumer data and likely take corrective action if bias is found. If the information comes from an algorithm or predictive model that uses “external consumer data and information sources,” even if it has a direct relationship to mortality, morbidity, or longevity risk, it may be seen as unfairly discriminatory against protected classes of people. The law has application beyond underwriting to include insurance marketing activities such as identifying individuals eligible for accelerated underwriting. One noteworthy issue is that the criteria of the law do not seem to be well-defined, and insurers are advocating for the use of algorithms and data models that are not too prescriptive and do not prevent or limit the use of traditional underwriting factors.

The use of family history and genetic information in underwriting is also under scrutiny. A Florida law limits the use of genetic information in the risk assessment process, stating that insurers “may not cancel, limit, or deny coverage, or establish differentials in insurance rates, based on such information”.

At RGA, we are eager to engage with clients to better understand and tackle the industry’s most pressing challenges together. Contact us to discuss and to learn more about RGA's capabilities, resources, and solutions.

Mental Health in the U.K.

In the U.K., the Association of British Insurers published its Mental Health and Insurance Standards in 2020, which provide clear guidance on supporting the needs of those with existing or prior mental health conditions. The standards were created in response to findings that individuals with mental health conditions faced significant challenges when accessing insurance, including limited opportunities for communication with the insurers, lack of clarity about exclusions or increased premiums, and use of unclear or outdated evidence. As such, the standards specifically address the insurance application process, communication channels, and proper use of evidence during the underwriting process.

A 2020 research report from Mental Health UK found that many applicants with mental illnesses are rejected at the early stages of the application process and left unable to find coverage due to lack of guidance. A significant portion of research participants said they would consider downplaying their mental health issues in future applications, which could significantly impact the industry. (Re)insurers will increasingly be required to support any decision on individuals with mental health issues with actuarial or statistical data that is relevant to the insurance-buying population.

Right to be Forgotten (RTBF) in the European Union (EU)

In the European insurance sector, RTBF laws are mostly directed at individual life insurance policies or credit-linked insurance such as payment protection. This stems from requirements in several countries for individuals to have certain insurance in order to obtain a mortgage. As a result, cancer survivors state that having a history of cancer can make borrowing and getting insured more difficult and more expensive, thus making it more difficult, or even prohibitive, to buy a property.

The EU Parliament, via its Special Committee on Beating Cancer, passed a non-binding resolution in February 2022 calling for all member states to guarantee the RTBF to EU citizens and roll out similar legislation by 2025. There are also calls for the RTBF to be included in the EU’s Consumer Credit Directive.

Meanwhile, several European countries have already introduced rules regarding RTBF:

  • France has had an RTBF law for credit-related insurance since 2015. Although the law initially applied only to cancer, it has since been expanded to include Hepatitis C, HIV, and other chronic diseases. Additionally, while the RTBF period for cancer started at 15 years, it has since been changed to 10 years and most recently to five years. The relative periods for the other diseases are also regularly updated.
  • In LuxemburgBelgium, and the Netherlands, cancer survivors do not have to declare their cancer to financial service providers 10 years after the end of their treatment, whereas for those diagnosed with cancer before the age of 21, this period is reduced to five years. In the Netherlands, this applies to life insurance policies within non-medical limits.
  • In Portugal, the RTBF law applies to most long-term evolving diseases and not just cancer or a limited list of chronic diseases. Similar proposals are expected in other EU countries in the coming years: Germany has a rule whereby questionnaires can ask only about diseases occurring within a certain time frame (five years, with 10 years for more serious diseases), and a proposal has been drawn up in Italy with similar provisions.
  • In the U.K., the likelihood of introducing similar legislation looks remote at present, although discussions have begun with the Association of British Insurers. However, it is likely that RTBF legislation will be introduced in Ireland, where similar conversations are occurring.

In 2021, Insurance Europe, the European insurance and reinsurance federation, published a position paper on RTBF, stating that only a few cancers are not associated with excess mortality within 10 years of diagnosis, and that a disregard of risk pooling in private insurance would “jeopardise insurance offerings in terms of availability, price, choice, or benefits for all consumers.” As such, the position paper calls for a greater consideration within RTBF of the different types of cancers, treatments, and outcomes in different markets as opposed to establishing blanket regulations. 

It is also worth noting the elimination of medical underwriting in France for mortgage covers under €200,000 for applicants/insureds who will attain age 60 before the policy expires. It is believed some applicants may choose to delay their application to benefit from this upcoming law.

Access to Insurance Cover in Asia

In Asia, recent regulatory changes have sought to increase access to insurance cover for specific groups, including individuals living with HIV or disabilities.

In the Philippines, under updates to Section 42 of the HIV and AIDS Policy Act in 2019, individual applicants for life or health insurance cannot be denied cover based on their HIV status. An estimated 120,000 people live with HIV in the Philippines, many of whom are unaware of their condition or remain untreated. According to the World Health Organization, new HIV infections in the Philippines increased by 237% between 2010 and 2020, in contrast to decreasing trends in new infection rates globally.

According to the Philippines Insurance Commission, an application can otherwise be assessed for medical factors unrelated to the HIV status as well as assessed for overall risk. There is a push to further relax HIV guidelines to remove HIV testing and any questions pertaining to HIV from the insurance application process. Postponing cover for up to one year from the start of continuous anti-retroviral treatment is also currently permitted with newly discovered HIV cases to assess compliance and efficacy of treatment, with discussions currently underway to bring the postponed time down to six months from start of treatment. Similar pushes have also been made by the Malaysian regulator, Bank Negara, to offer coverage to individuals living with HIV. However, this has not been formally followed up with any regulatory changes.

In addition, the Philippines Insurance Commission released a circular in 2020 aimed at providing increased insurance protection for persons living with disabilities. The commission noted that persons with disabilities should be given the opportunity to accept an adjusted premium or a new suitable insurance plan. The only exception to this was simplified issue cover, but it was noted that fully underwritten insurance products should be offered in the absence of additional risk factors or co-morbidities.

Finally, many Asian markets already prohibit the use of genetic information in the underwriting process. JapanSouth Korea, and Taiwan already prohibit the use of family history in the underwriting process, while Thailand introduced regulation earlier this year that restricts the request for, or use of, family history details for risk assessment.

Looking to the Future

While traditional anti-discrimination legislation makes exceptions for the right to underwrite, challenges continue to emerge from new legislation, special interest groups, and consumers.

Maintaining an appropriate balance between consumer and insurer needs is imperative for insurance accessibility. An over-aggregation of insurance pools may prevent (re)insurers from providing targeted offerings and differentiated products to as many people as possible, while still allowing  access to coverage for vulnerable populations.

The legislation around RTBF is developing rapidly, and jurisdictional developments should be carefully monitored. (Re)insurers should work to ensure transparency in underwriting guidelines and data-driven models to avoid discrimination against protected classes. They should also frequently review guidelines based on current medical definitions that reflect improvements in treatments and prognosis.

Lastly, RGA encourages (re)insurers to remain engaged on this topic with industry partners and consumer groups, as well as regulators and legislators, in order to encourage transparency and open dialogue to achieve balanced and mutually beneficial outcomes.

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Meet the Authors & Experts

Gabrielle Wood
​Gabrielle Wood
Chief Underwriter, RGA Italy
Nicky Virgo
Vice President (ret.), Head of Underwriting Manual Development