illuminem/ LinkedIn
June 21, 2024
https://www.linkedin.com/feed/update/urn:li:activity:7209805029636005888/
Dr. SHREERAJ DESHPANDE helps me navigate through the challenges posed to health insurance in the times of #Climatebreakdown. The world’s most populous country, diabetes capital, dealing with obesity, malnutrition, ageing – now coping with heat and humidity, poor air quality, water crunch and a missing health regulator.
Could the growing focus on increased penetration hit a wall – as some geographies pose a serious threat to human health? Needless to mention, a rising number of senior citizens are left out of the safety network; gig workers have no protection and primary healthcare in much of the country has disintegrated.
“7,000 people slip into poverty every hour in India because of catastrophic health expenses”.
Shreeraj believes health insurance is here to stay and innovation holds the key.
Dr Shreeraj Deshpande is a well known Health Insurance expert. He has over three decades of experience in both private and public sectors of the insurance industry. Shreeraj was responsible for setting up successful Health verticals in three insurers, including the Allianz and Generali joint ventures in India. He is a much sought after member of various industry level as well as regulatory committees on Health Insurance. He was awarded a doctorate in health insurance by the University of Pune.
Praveen Gupta: ‘State of Global Air 2020’ showed that 22 children died every hour due to air pollution a day in India. During peak winters, thanks to pollution levels, a passive smoker in Delhi could inhale smoke equivalent of 10 to 15 cigarettes every single day.
With rising frequency & severity of respiratory ailments, is there a case for differential pricing in such locations?
Shreeraj Deshpande: Medical underwriting in Individual Health insurance involves health risk assessment including medical screening wherever required. The health risk assessment which insurers carry out involve seeking information on habits such as smoking, alcohol consumption, existence of life style diseases, occupation, etc., and will depend upon the extent of availability of data and applicability while underwriting. Height and Weight to calculate Body mass index (BMI) is the most common method of health risk assessment. Insurers also adopt geographical based underwriting strategies as well as differential pricing. Broadly this is based on the experiential analytics in these geographies in terms of frequencies and severity. In India Health Insurance is majorly confined to Hospitalization Insurance though Comprehensive Health Insurance is slowly making inroads.
There are various factors which could contribute to the high or lower frequencies and severity of hospitalizations which can include environmental conditions like poor air quality or water quality. The availability of data which can be analyzed and interpreted is very important. When we look at comprehensive health insurance including Outpatient Department (OPD), the more the data available for risk assessment the finer can be the pricing. Insurers do collect International Classification of Diseases (ICD) code wise data and use the same while pricing products.
The changing regulatory scenario would have a very important impact on the way underwriting is done.
One of the fall outs was that the fundamental approach of “Underwriting at Acceptance and not at Claims” started getting ignored which resulted in increased customer grievances.
PG: Do you see a shift in risk assessment: from one largely based on individual lifestyle to also a combination of individual and geographic triggers like air quality, heat, humidity?
SD: Around a decade back Indian health insurers were more into Medical underwriting basis age/sum insured and adverse declarations, the proposer was asked to undergo pre acceptance medical tests. Over the years market evolved and the pre-acceptance medical tests age limit/ sum insured limits got raised. This was also because of pressure on numbers and growth. Insurers who were into business for some time started expanding their book making sales process for health policies easier. One of the fall outs was that the fundamental approach of “Underwriting at Acceptance and not at Claims” started getting ignored which resulted in increased customer grievances.
With the emphasis of the regulator to increase customer confidence, it is now very important for insurers to have prudent underwriting strategies with growth. Insurers will have to use a mix of medical underwriting and other external parameters. This becomes even more important in automated underwriting with use of AI and ML. Analytic capabilities and platforms are now available however suitable data needs to be collated and analyzed. Profiling of customers using AI & ML will happen the way it happens for other consumer products. This should also account for adverse environmental factors.
PG: Once the data is plentiful, do you see a shift from personalized side to extraneous factors? How would that transform the way health insurance is not only underwritten but also how it is bought and sold?
SD: As the portfolio size of any insurer increases the underwriting strategies also change. In the initial periods of building a portfolio, insurers are selective and try to avoid adverse selection etc., by adopting to medical underwriting. As the portfolio increases and with good experience insurers tend to relax their strategies and grow. Ease of sales process with simplified underwriting is something which every distributor would want. Therefore insurers would profile their customers in advance – using AI and ML – well before targeting them.
The regulatory changes also have a major role to play. In some markets denying insurance covers based on pre-existing conditions or discriminating premiums charged is prohibited by law. While Insurers may be allowed to price according to geographic factors / experience, individual underwriting will in all likelihood not be allowed. In such cases use of extraneous data and pre-underwritten products would have a major role to play.
Parametric offerings to protect against rising heat and adverse quality air could become a mass offering.
While insurers do adopt underwriting strategies to balance their exposure across geographies and risk profiles even in Health Insurance it may be unfair for common citizens who are inhabitants in such places to bear the brunt of higher pricing or denial of coverage.
PG: Not just the workplace, living areas and time spent on commute – should you not account for these health stressors? Heat & humidity are known triggers for neurological and cardiac conditions – shouldn’t they be accounted for?
SD: This is similar to what we discussed above. Insurers can definitely consider these while carrying out risk assessment – subject to availability of the data. For example Insurers do generally have a question on occupation, location etc. More detailed questions can elicit more information. While type of job or location could have increased stress but whether the individual also performs activities like exercise / yoga which helps him reduce or manage stress.
How much information insurer can collect, collate and analyze and actuarially use is important. While overall frequency and severity of hospitalization is sufficient for hospitalization products more finer data would be required to assess risks covering comprehensive health care. I believe, as of now, the adverse impacts of climate fall well within the frequency and severity parameters of hospitalization. However, this needs to be fine-tuned with the OPD extension, wherever applicable.
The regulatory changes across economies are moving towards making health insurance available without discrimination to citizens and some markets do not allow refusal of coverage or even differential pricing basis pre-existing conditions. In some markets medical underwriting is used to allow discounts in premiums for medically underwritten proposals. Some markets prefer to adopt community-based pricing where risk is distributed over the community in a geographic distinction. With automated underwriting gaining momentum in retail health – use of AI and ML is increasing with wider use of data.
PG: Would employers be vicariously liable for locating work spaces in unhealthy environments?
SD: This can happen only if the workplaces do not meet regulatory compliance of locating work places or not following applicable regulations such as Pollution Control Acts and hazardous chemicals handling. The Workmen Compensation (WC) Act also lists down occupational diseases which can be revised from time to time. Anything within the workplace the employer can be made responsible, however, the responsibility of keeping geographic environment healthy, pollution free is a collective responsibility of the governments and citizens.
Health Insurance has a social need and changing regulatory scenarios across economies emphasize that health insurance be made available to all citizens and cannot be denied or discriminated.
PG: Physical assets prone to wildfire, floods, windstorms are increasingly becoming uninsurable. Could human health in challenged locations be next?
SD: While insurers do adopt underwriting strategies to balance their exposure across geographies and risk profiles even in Health Insurance – it may be unfair for common citizens who are inhabitants in such places to bear the brunt of higher pricing or denial of coverage. There are certain diseases/conditions which are endemic to some places and insurers have to adopt an underwriting philosophy combined with risk management and risk reduction on continuous basis to improve risks or keep people healthy.
Health Insurance has a social need and changing regulatory scenarios across economies emphasize that health insurance be made available to all citizens and cannot be denied or discriminated. Insurers will have to implement risk management practices like carrying out medical screenings, conducting health and wellness campaigns for improving risks in such areas.
PG: Women and children constitute a large chunk of population that remains outside the health safety network?
SD: Some innovations do give me hope. Recently a parametric offering was introduced to protect women workers in the unorganized sectors, particularly working outdoors, from exposure to excessive heat. This is an unchartered territory which deserves to be looked at closely.
PG: Many thanks for these very informed insights, Dr. Deshpande.
illuminem
June 5, 2024
https://illuminem.com/illuminemvoices/shedding-the-coloniser-in-us
https://www.linkedin.com/feed/update/urn:li:activity:7203729537296138240/
My Op-ed for illuminem on the eve of #WorldEnvironmentDay.
A tiger is a metaphor for the apex of the food chain, relentlessly hunting it is nothing but brutalising #Nature. We continue to exterminate the magical #biodiversity that we inherited.
“For centuries, the dominant global powers have seen #Earth – its plants, its animals, and its nonwhite peoples – as brute objects: mute, without agency, and available for the taking and killing… Writes Amitav Ghosh in The Nutmeg’s Curse.
Much, if not most, of humanity today lives as #colonialists once did – he reminds – viewing the Earth as though it were an #inert entity that exists primarily to be #exploited and #profited from, with the aid of technology and science. Yet even the sciences are now struggling to keep pace with the hidden forces that are manifesting themselves in climate events of unprecedented and uncanny violence”.
As we get closer to breaching all the #Planetaryboundaries – Mexican President elect – Claudia Sheinbaum Pardo – is a ray of hope. #Patriarchy has forever been a key driver of #Climatebreakdown. Much of political and corporate leadership – across the world – suffers serious deficit in understanding the gravity of an #existential crisis. As a first woman head of state in North America and a Climate expert – may she usher the much-awaited inflection.
Illuminem
May 30, 2024
https://www.linkedin.com/feed/update/urn:li:activity:7201776765420109825/
My interview with Wolfgang Kuhn in the illuminem. Like always – crisp, candid and seminal.
#Biodiversity: I think it has arrived on the radar…pricing biodiversity is impossible. Not that people aren’t trying, but I think it is the wrong approach.
Central bank policy: The single biggest reason why #Sustainability risks are neither priced nor taken seriously.
Business: Helps set the rules through outsized influence.
How executive remuneration has developed: I am minded arguing that stewardship has never worked.
So who is controlling #corporations: If shareholders aren’t able to? Corporations control themselves.
If you only care about financials: Then you focus on the immediate future, and discount anything beyond 10 years in the future. No #scenarios needed.
If you do care about the world: You try to cut your negative impact as fast as possible. No scenarios needed.
If box ticking is your answer, than tell me: Do you think that pilots should do box-ticking before they fly, or do you prefer they follow their gut instinct?
Disclosure is not sufficient to get action: But I would argue that it is pretty much a necessary condition.
Here are nuggets – none should wish to miss!
May 19, 2024
https://www.linkedin.com/feed/update/urn:li:activity:7198051019358900224/
And here you can hear Prof. Rupert Read and I having a spontaneous conversation:
https://www.youtube.com/watch?v=lru2x4GDCq0 many months ago.
Wolfgang Kuhn is an independent consultant advising on sustainability-related matters in a financial market context. Previously, he was Director of Financial Sector Strategies at London-based research and campaigning group ShareAction. Before joining the civil society sector, Wolfgang spent 20 years analysing and investing in corporate and government bonds.
Wolfgang holds a German master’s degree in business administration from Technical University of Berlin, is a GARP Financial Risk Manager (FRM), a Certified EFFAS Financial Analyst (CEFA), and used to be a CFA charterholder.
Praveen Gupta: Much of Climate breakdown discussion centres around Carbon. Biodiversity is not on the radar?
Wolfgang Kuhn: Well, I think it has arrived on the radar, looking at The Taskforce on Nature-related Financial Disclosures (TNFD), Partnership for Biodiversity Accounting Financials (PBAF) and other initiatives. But is much more difficult to deal with, as location is a crucial element, which isn’t the case for carbon. Also, you can’t use the I-wish-we-had-a-carbon-price excuse to inaction because pricing biodiversity is impossible. Not that people aren’t trying, but I think it is the wrong approach.
PG: Is the financial sector absolving itself by pushing the buck back to governments?
WK: A resounding yes. Of course and without doubt, governments have the major role here. But we won’t get very far if we go with the entrenched view that it is for business to profit-maximize and governments to set the rules. Corporations now make decisions too systemically relevant and far reaching to allow them to push all responsibility towards governments.
PG: Is Too-Big-To-Fail (TBTF) making big finance complacent. They know central banks will bail them out? Did Alan Greenspan set a bad trend?
WK: Not TBTF of individual large financial institutions, but TBTF of the whole financial market. Central bank policy over the past quarter of a century (Greenspan put, Bernanke put, QE, asset purchase program this, asset purchase program that) has prioritized the stabilization of the financial system over anything else. Asset price inflation is outside of the mandate when stock prices are going up, but when stock prices are going down, deflationary pressures are cited to justify accommodating policy. I would argue that central bank policy is the single biggest reason why sustainability risks are neither priced nor taken seriously.
Everyone knows full well that the financial system has been allowed to become so over-levered that central banks can’t tolerate any half-significant asset price drop without risking the dominos to start falling. So why worry about stranded assets? Systemic issues are irrelevant because they are taken care of. By the time central banks can’t help any more, you will have left too much money on the table if you didn’t invest in systemic risks. Maybe this is also a reason for the ESG-push-back: it isn’t obvious why the systemic risks we are facing are danger to people’s portfolios.
“The standard argument is that business should be allowed to make profits at all costs, and that it is for the state to set the rules.”
PG: Public companies have become very big and assertive. And PE companies are free for all modes at private companies. Isn’t this corporate capture in play?
WK: Yes. The standard argument is that business should be allowed to make profits at all costs, and that it is for the state to set the rules. But then business helps setting the rules through outsized influence. Honi soit qui mal y pense (“shame on anyone who thinks evil of it”).
PG: Would you agree stewardship is in crisis?
WK: Looking just at how executive remuneration has developed, I am minded to argue that stewardship has never worked. And it appears the system is built against shareholders exerting their will. Of course, investors can tell management individually, but are bound to be ignored. Or they could do so in coordinated fashion, but inevitably, someone will say that is against the law.
That is why collaborative engagement platforms are ineffective: they cite the risk of being seen acting in concert, or anti-competitively as reason for not really coordinating their actions. So everyone is on their own. It is a convenient argument, but also one that is very difficult to disprove.
If groups of shareholders aren’t permitted to form a view together, than we are in a similar situation to those of autocratic political systems: people might still get a vote, but if they are not permitted to co-ordinate and form parties, voting results become what those in charge of matters want. Autocrat governments always get the votes. (Ok, maybe comparing CEOs to autocratic leaders goes a bit far).
Now, that may just work fine for companies and their shareholders on a day-to-day basis: Why care how much shareholders leave on the table. But when we come to systemic issues, CEOs ignorant of systemic threats (the persistent academic argument that management knows best is highly questionable) need direction. But directing is not possible, because shareholders are not permitted to express a common view. At least that is what we are told, and everyone is happy to play along. So who is controlling corporations if shareholders aren’t able to? Corporations control themselves. Go figure.
PG: Not only is climate risk becoming more immediate, but it is also systemic and likely to manifest as #polycrisis?
“If you do care about the world, you don’t bother with figuring out how much of the ‘carbon budget’ is yours.”
WK: People are going on and on about whether portfolios are aligned with this or that scenario. A pretty irrelevant exercise, in my view, mostly used to justify the status quo. If you only care about financials, then you focus on the immediate future, and discount anything beyond 10 years in the future. No scenarios needed. If you do care about the world, you don’t bother with figuring out how much of the ‘carbon budget’ is yours. You accept that ANY further warming is going to have terrible effects, and you try to cut your negative impact as fast as possible. No scenarios needed.
PG: Has sustainable finance lost its way?
WK: Sustainable Finance is busy convincing everyone that it is all about financing ‘solutions’, about financing ‘impact’. All about financing green. Greening finance is discounted as something unscientific. Worrying about financing pollution is un-scientific. Not investing in fossil fuels has no effect on the world. Refraining from investing in economic activity that involves child labour is ‘value-based’, but not impact-generating. So they say.
PG: Isn’t ESG getting boxed in the disclosure space?
WK: No. That seems to become common sense, but it isn’t true. Of course, everyone knows what should be done without any more disclosure. Unfortunately, though, no-one will do anything without more disclosure.
If you have a problem with disclosure, why is that? If box ticking is your answer, than tell me: do you think that pilots should do box-ticking before they fly, or do you prefer they follow their gut instinct?
Of course, disclosure is not sufficient to get action. But I would argue that it is pretty much a necessary condition.
PG: Many thanks Wolfgang for your trademark crisp and candid insights!
Illuminem
April 27, 2024
https://illuminem.com/illuminemvoices/boeing-is-it-really-about-supply-chain
Re-published by The Insurance Times
May 2024
Illuminem
May 9, 2024
https://www.linkedin.com/feed/update/urn:li:activity:7194144897501655040/
Walter Murphy charts an unfolding drama that lies ahead for #insurers and #reinsurers #underwriting and #investing in #fossilfuel – in his interview with me.
The average window between billion-dollar climate disasters in the United States has drastically reduced to a mere 20 days.
Interestingly, despite the rising frequency and severity of losses, some of the biggest reinsurers operating in the US market have made record profits. Perhaps a part answer lies in the fact that climate risk prone areas are rapidly becoming #uninsurable.
Walter explains: “U.S. insurers currently have approximately $582 billion invested in fossil fuels, including nearly $90 billion in coal alone.”
“The insurance and reinsurance sectors continue to underwrite fossil fuel projects and continue to invest premiums in fossil fuel companies, thereby exacerbating the #climaterisks (hurricanes, flooding, wildfires, etc.) that directly affect their business. They have and continue to contribute to climate change.”
“As the world accelerates its #energytransition pace to move from a fossil fuel-based to one run by #renewableenergy, Walter tells me, all those fossil fuel assets that the insurance and reinsurance sector continue to hold and finance become highly vulnerable to becoming #strandedassets.”
US Treasury Secretary, Janet Yellen, has expressed alarm at the growing #protectiongap for Americans seeking insurance against property losses. Increasingly the federal government is the one becoming insurer of last resort.
Given this stark reality, can ‘astute’ underwriters, and the rest of ecosystem continue gaming what to and what not to patronize?
The Diversity Blog 