Life Insurers Moving Toward Using Mortality Management to Increase Profits

Business Editors/Insurance Writers

EDISON, N.J.--(BUSINESS WIRE)--May 21, 2008--Life insurance companies are starting to consider using mortality management as a strategy to improve their bottom line, according to a survey conducted by MajescoMastek and Transamerica Reinsurance, a division of Transamerica Occidental Life Insurance Company.

New rules-based underwriting platforms and processes can enable insurance carriers to reduce their mortality expense, as well as significantly improve the cost structure, acceptance rates and mortality experiences of their life insurance products programs.

The majority of insurers polled base their new business process on work flow and images as well as capturing application and evidence in data form versus paper. Carriers are starting to consider rules-based underwriting engines, which provide numerous benefits, including the ability to assess risks on a real-time basis, and review and audit decisions.

MajescoMastek, a leading IT solutions provider focused on the insurance industry, and Transamerica Reinsurance, a leader in assessing and managing mortality risk, surveyed about 50 insurers on managing mortality expenses and unveiled results at the ACORD LOMA Insurance Systems Forum last week in Las Vegas. The two companies have partnered for five years in providing value-added solutions for the term-life market.

Why is mortality management so important? An analysis by Transamerica Reinsurance found that a company can generate $4 million in increased profit for every $10 million in new annual premium by reducing claims expenses by 6.6 percent over the life of the block of policies. By comparison, the company also found that improving productivity by 10 percent in underwriting and new business processing generates only $500,000 in increased profit for the same example.

“While insurers historically have not invested in tools and processes to manage mortality expenses, that could be changing as insurers recognize the potential to increase profits and reduce costs,” said Harold Apple, senior vice president of VectorMastek, a subsidiary of MajescoMastek.

Mortality management can ensure that individual risk decisions are made consistently with a carrier’s pricing assumptions and underwriting guidelines; enable the predictability of mortality studies through the capture of medical evidence in data form; and provide underwriting management with productivity and management tools.

“Understanding and managing mortality risk will become even more essential to a life insurer’s success as we move toward principle-based regulation and capital markets financing solutions,” said David Dorans, Vice President, Product Consulting & Development, Transamerica Reinsurance.

“In order to meet new regulations and satisfy new players, management needs a granular understanding of how their company’s products are performing. This requires significantly greater access to information. IT departments will be asked to provide detailed information on mortality and to quickly get numbers on such things as actual versus expected in preferred classes or the number of underwriting exceptions in a block of business. New underwriting technology platforms can enable this,” Dorans said.

Among the technologies that can improve mortality management operational efficiencies are: Service Oriented Architecture (SOA); Straight Through Processing (STP); Web-based systems using Microsoft.NET and J2EE technology; communication between provider, internal system and client that utilizes ACORD-compatible TXLife transactions; and the capability to operate anywhere using a Web-based system that supports telecommuting, overflow staffing, etc.

About MajescoMastekMajescoMastek is the U.S. subsidiary of Mastek, a $184 million publicly held, global software solutions company with offices in 10 countries and with over 3500 employees across the globe. Mastek has a proven track record of delivering large scale, business critical technology solutions to insurance, government and financial services organizations worldwide.

MajescoMastek and its subsidiaries VectorMastek and STGMastek bring together deep domain expertise with years of global experience in helping insurance carriers and leverages intellectual property in the areas of distribution management, new business and underwriting, billing, claims, and policy administration. For information: http://www.majescomastek.com.

About Transamerica Reinsurance

Transamerica Reinsurance, a division of Transamerica Occidental Life Insurance Company, an AEGON company, is among the largest suppliers of automatic and facultative reinsurance capacity based on new business (face amount) written (Munich Re Survey, 2007) and net premiums written (Fitch, 2006). The reinsurer is also a leading provider of value-added product development, risk and capital management solutions to financial services companies in the life and annuity markets. It serves more than 500 client companies in the U.S., Latin America, Europe and the Asia Pacific region.

Transamerica Reinsurance’s products and services are offered through Transamerica Occidental Life Insurance Company, Transamerica Financial Life Insurance Company, Transamerica International Re (Bermuda) Ltd., Transamerica International Reinsurance Ireland Limited, and AEGON Levensverzekering N.V., all AEGON companies. AEGON is a leading multinational financial services group. For information: http://www.TransamericaReinsurance.com.