A New Disease – Underwriting Without Evidence

A Berkshire Hathaway Company

UNDERWRITING FOCUS

MARCH 2021

Content

Requirements for evidence-based

underwriting 1

Underwriting with little evidence 2

How to make decisions in uncertainty 3

Risk assessment for COVID-19 4

Conclusion 5

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Firstly, it ensures that the underwriting decision adequately compensates the risk

the insurer takes on by granting cover to the applicant.

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Secondly, and most importantly, acting on the basis of suitable and sufficient

evidence is a legal obligation. Only by doing so insurers can meet the requirements

of current anti-discrimination legislation.

Where the experience based on a company’s own insurance portfolio is insufficient,

the risk assessment for medical risks is based in particular on clinical studies and

statistics. These are carefully selected according to well-proven criteria for their

quality and relevance to the risk to be assessed. The decision whether or not a clinical

study is considered suitable to be used in the underwriting context, depends on a

large number of parameters. Among the most important parameters are:

1. Length of the follow-up period: Only studies with a sufficiently long observation

period can support making a long-term prognosis as required in Life insurance.

2. Participants of the study: The study has to fulfil requirements concerning the size

of the group as well as study subjects being either representative of a collective to

be insured or that findings can be transferred to such a collective, albeit with some

adjustments.

Transferring findings from clinical studies to the insurance context is the task of

multi-disciplinary teams of experts who will consider all relevant medical, actuarial

and legal requirements. Many years of clinical and underwriting experience of

medical doctors and underwriters are involved in the development of guidelines.

This experience complements the scientific findings to allow the development

A New Disease – Underwriting

Without Evidence

by Annika Tiedemann, Gen Re, Cologne

Requirements for evidence-based underwriting

Underwriting guid

elines today follow the principles of evidence-based underwriting.

By adhering to those principles, insurance companies make sure that all risk decisions

made by underwriters have a substantial statistical basis. Most importantly, that is

true for such decisions that classify the applicant as a substandard risk and therefore

result in an additional premium, an exclusion of parts of the risk or even the

declinature of the application.

Evidence-based risk assessment in underwriting is crucial for the following (at least)

two reasons:

of risk-adequate guidelines that are

technically correct and applicable in

practice at the same time.

With the requirements of evidence-based

underwriting in mind, the emergence

of a new disease at first glance seems

to be an insurmountable challenge:

Naturally, neither comprehensive clinical

nor underwriting experience exists. And

even though some early clinical studies

may emerge, case numbers will be small

and observation periods short. Does this

mean the requirements of risk-adequate

and evidence-based underwriting cannot

be met in such instances?

Underwriting with little

evidence

The discovery of a new virus, such as

SARS-CoV-2, is an uncommon event.

Even more uncommon is that the virus

is of immediate global significance. This

is everything but daily business from an

underwriting perspective.

When the first cases of the new

coronavirus emerged in early 2020, little

did we know what would happen. Thus,

it was our utmost priority in the early

days to follow the developments closely

and assess the relevance for the insurance

industry.

As the number of cases grew, we focused

on learning everything possible about

the new virus and making – albeit

preliminary – assumptions regarding the

risks associated with it. Not surprisingly,

more questions than answers arose.

To come up with guidance on how to

address the issue from an underwriting

perspective, we nevertheless gathered

what little established evidence there

seemed to be and made best-estimate

assumptions based on unfamiliar and

unpleasantly uncertain grounds. This

challenge was one of a kind for us.

However, having to make underwriting

decisions on the basis of very little,

incomplete or only partially suited

evidence is by no means uncommon.

The underwriter faces a similar problem

for rare diseases. Rare diseases are

diseases with only very few, sometimes

a few hundred people affected globally.

Deriving underwriting decisions for such

a group of patients can be a challenge for

the following reasons:



A disease with only a few affected

patients often generates very little

research. Hence, only few or even

no clinical studies might have been

published. Those that exist may be of

good quality, but they could also be

outdated or biased. With no alternative

evidence available, they will still have

to be used to derive underwriting

decisions.



If the course and outcome of the

disease vary significantly among

those affected, it is hardly possible

for the underwriter to make a reliable

prognosis regarding the outcome for

the average affected person. Individual

outcomes therefore determine the

assumptions regarding the risk of the

group much more heavily than in more

common types of disease.



The treatment of rare diseases

often generates significant costs.

If that is the case, accessibility and

affordability of treatment can be

decisive factors for the survival and

potential recovery of the patient.

Underwriters will struggle to predict

whether an individual applicant will

receive optimal treatment for as long as

it is required.



It is highly unlikely that in their own

clinical practice insurance doctors

have previously seen patients with the

respective disease.



Insurers also can’t learn from past

cases in their portfolio because these

cases are unlikely to exist, let alone in

sufficient quantity.

How can fair and adequate decisions

nevertheless be made for such cases?

2 Gen Re | Underwriting Focus, March 2021

How to make decisions in

uncertainty

Developing underwriting guidelines

with limited evidence will always be a

highly complex and individual process.

However, certain steps of the process will

always be the same.

Having established processes helps

especially when – such as in the early

days of COVID-19 – many things are still

unclear. In these situations, it is more

important than ever to concentrate on

the facts at hand and apply well-proven

routines.

To start off the process, the following

questions should be asked:



What is known about the disease?



Do we see similarities to other,

previously known diseases?



Which sources of information can be

used for the evaluation?



When do we change our assumptions?

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What do we not know?

What is known about the disease?

Instead of focusing too much on what is

not known, it is important to concentrate

first on what is known about a disease.

Even with a new disease like COVID-19,

quite substantial information will always

exist, e. g. information of the following

kind:



What causes the disease?



In case of a viral infection, is the

virus that is causing the respective

disease already known or is it a newly

detected virus?



In case of communicable disease, how

is it transmitted?



What symptoms have been observed

in patients during the course of the

disease?



Can a typical course of the disease be

described?



How does it compare to the typical

course observed in related diseases?



Which organs are affected by the

disease and in what way are they

affected?



How does the disease respond to

different therapeutic measures?



What complications have been

experienced?



Have significant differences in outcome

been observed in different groups of

patients, e. g. males vs. females, old

vs. young, patients with pre-existing

conditions vs. otherwise healthy etc.?

This information can provide some initial,

but already very valuable insights into

the risk.

Do we see similarities to other,

previously known diseases?

Every disease shows significant

overlaps to other diseases in

symptoms and effects. Identifying and

understanding such similarities can

be extremely helpful when deriving

the risk profile of a new disease for

underwriting purposes.

Specifically for the virus SARS-CoV-2 and

the resulting disease COVID-19, here are

some parallels:



SARS-CoV-2 is a coronavirus, and

there have been previously known

coronaviruses. Two of these,

SARS-CoV-1 and MERS-CoV, have

themselves caused epidemics. Extensive

research exists for those two diseases

and their respective outbreaks that give

valuable insight into basic mechanisms

of coronaviruses.



None of the symptoms of the disease

COVID-19 – ranging from classic

symptoms of cold or flu, such as cough

and rhinitis to respiratory distress,

fever and neurological deficits – are

unique to COVID-19, i. e. are being

observed regularly in other diseases.

Consequently, the immediate effects

they will have on the well-being of

patients are well-described.



Some of the more serious complications,

e. g. pneumonia, pulmonary embolism,

stroke or even the failure of organs –

such as the kidneys or lungs – can also

be triggered by other severe diseases.

Using the experience from those diseases

enables better prediction of long-term

outcomes.



In the most severe cases of COVID-19,

treatment in an intensive care unit and

the use of mechanical ventilation may

become necessary. This treatment can

have long-term health implications

for survivors – such as respiratory,

neurological, but also mental

impairments – further aggravating the

effects of the underlying disease itself.

These implications are not unique

to the treatment of COVID-19 ; their

evaluation can therefore draw on

well-established clinical experience.



Among the most important questions

regarding COVID-19 has been “Who

is most at risk of suffering a severe

course of the disease?” Very early on

in the pandemic, various health care

institutions published guidelines as to

who they considered to be among the

high-risk group. They did so using what

was known at the time about COVID-19,

but also using years of experience

with similar diseases. These guidelines

have proven to be very accurate and

have only been marginally refined and

extended over time.

Which sources of information can be

used for the evaluation?

As mentioned above, the selection

of appropriate evidence is one of the

most important steps in the derivation

of evidence-based risk assessment

guidelines. With little evidence available,

this choice becomes easy, but the output

may not always be satisfactory.

In the case of COVID-19, it is not the

lack of evidence as such, but the lack of

long-term evidence that is a challenge. In

contrast to this, the quantity of available

short-term evidence is and has been

record-breaking.

This included numerous clinical studies.

Since the beginning of the pandemic,

new ones have been published seemingly

almost every minute. While the quality

of the studies may be good, they often

look at small case counts only. In many

instances, they were published in a

preliminary stage to speed up the process

of understanding the new disease. While

this is reasonable to drive the scientific

process, the level of certainty needed for

decisions requires long-term evidence.

Gen Re | Underwriting Focus, March 2021 3

In addition to clinical studies, we have

seen a flood of other, often more

spontaneous pieces of information,

such as:



Statements from numerous – actual or

self-proclaimed – experts



Reports from hospitals or medical

doctors involved in the treatment of

COVID-19 patients, often with very

specific observations



Very personal “eyewitness accounts”

of survivors of the disease or family

members of the deceased



Millions of newspaper articles of vastly

varying quality and informative value

In light of these information sources, the

real challenge is not only going through a

significant amount of it, but also deciding

on which ones to rely. The following

criteria will help in that decision process:



Who is the author of the information?



What was the reason for publishing the

information?



Is the author qualified to talk about the

subject in question?



When was the information published?



Has the information been

quality-checked and/or peer-reviewed?



Are we looking at the original source

of information or just a reproduction

of it?

When do we change our

assumptions?

Both very little data (as in the case of rare

diseases) and currently evolving data (as

in the case of newly detected diseases)

mean that every new piece of information

can fundamentally change what we

know about a disease. Both situations

therefore require a regular and very

diligent monitoring of new findings.

Reacting to every new piece of

information is just as inappropriate as

ignoring evolving evidence. A clear

decision process is needed as to when

new evidence is considered substantial

enough to result in changes to the overall

strategy.

What do we not know?

Eventually, while assessing the risk of a

new disease, it is important to reflect on

what is not (yet) known and what may as

well be impossible to know. These factors

must be kept in mind as they can change

the rules of the game literally overnight

and as such may make it necessary to

modify the underwriting strategy at very

short notice.

Risk assessment for COVID-19

In the process of developing underwriting

guidelines especially for medical risks,

it is paramount to also look beyond the

disease in question. In many cases, other

factors will have to be considered that

may play a vital role in determining the

risk. In the case of COVID-19 specifically,

there are a number of such aspects.

The political factor

Governmental measures to curb the

spread of the virus have had a major

impact on the course of the pandemic.

Regional differences in case count but

also death rates are to a significant degree

only explained by the measures adopted.

They range from limited restrictions of

social contact to strict curfews, from

wearing masks being compulsory to

closing down borders. Modifying the

political strategy has also resulted in huge

differences in outcomes in a first and

second wave of the pandemic in some

regions.

This will inevitably influence not only

the overall course of the pandemic but

also individual risk. It will determine to a

significant degree the possible exposure

to the virus of potential clients but also

the availability of health care services

once they contract the disease.

The human factor

People across the globe are confronted

with a once-in-a-lifetime event. And this

is true not just for those people that have

fallen ill or experienced illness in friends

or family. It is true for literally everyone

because everyone is at risk of contracting

the disease and is likewise affected by the

mitigating measures imposed by their

respective governments.

Under these circumstances, human

behaviour plays a vital role in determining

individual risk. How well will an individual

comply with the suggested safety

measures? And how easy will it be to

avoid risk given the individual’s living

conditions, e. g. housing, occupation,

family? While we won’t try and make

assumptions about individuals’ behavior

and thus will refrain from basing our

underwriting decisions on that behaviour,

4 Gen Re | Underwriting Focus, March 2021

it is important to be aware of these factors

while creating a general underwriting

strategy around COVID-19.

Medical factors

On the medical side, three possible

developments of a very different nature

have the potential to significantly

influence the risk associated with the

disease:



New treatment options could

significantly improve outcomes of the

disease.



The availability of effective vaccines

may help many people to avoid

becoming ill.



Mutations to the virus could

significantly change the risks associated

with it – for better or worse.

All of these could have a significant

impact on the individual risk.

Conclusion

The COVID-19 pandemic has plunged

the world into tremendous uncertainty.

As such it has also been and remains

an unprecedented challenge for the

insurance industry.

As insurers, however, dealing with

uncertainty is our daily business. We

therefore have well-established processes

and procedures to go about our business

even under difficult circumstances.

About the author

Annika Tiedemann is Head of Underwriting Research,

Global Underwriting and R&D, based in Gen Re’s Cologne

office. As such, her tasks include Gen Re’s underwriting

manuals as well as providing support to international

clients in questions of underwriting.

Tel. +49 221 9738 345

annika.tiedemann@genre.com

For underwriting in the Life and Health

space, this means first and foremost

identifying experience we can build on

while at the same time being prepared

to modify our procedures to newly

established knowledge. In doing so, we

can make underwriting decisions that

will meet our requirements of being

risk-adequate and evidence-based to the

extent possible under such extraordinary

circumstances.

The published articles are copyrighted. Those which are written by specified authors do not necessarily constitute the opinion of the publisher or the editorial staff. All the information which

is contained here has been very carefully researched and compiled to the best of our knowledge. Nevertheless, no responsibility is accepted for accuracy, completeness or up-to-dateness.

In particular, this information does not constitute legal advice and cannot serve as a substitute for such advice.

Publisher

General Reinsurance AG

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50668 Cologne

Germany

Tel. +49 221 9738 0

Fax +49 221 9738 494

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