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w ww . I CA2 0 1 4 . o r g “Adversity reveals genius, prosperityconceals it.” — HoraceHIV – 3 DECADES LATEREffects on the Life Business inKenya - by Luke WanjohiDefining AIDS Infected with HIV and present with one ofthe following: – A CD4 T-cell count below 200 cells/μl(or a CD4 T-cell percentage of totallymphocytes of less than 14%) After more than 30 years of HIV pandemicuseful lessons are many. We consider a case study of KenyaDefining AIDS – or he/she has one of the followingdefining illnesses: Candidiasis of bronchi, trachea, or lungs ; Candidiasis esophageal ;Cervicalcancer (invasive) ; Coccidioidomycosis, disseminated or extrapulmonary;Cryptococcosis, extrapulmonary ; Cryptosporidiosis, chronic intestinal forlonger than 1 month ; Cytomegalovirus disease (other than liver, spleen orlymph nodes) ; Encephalopathy (HIV-related) ; Herpes simplex: chroniculcer(s) (for more than 1 month) ; or bronchitis, pneumonitis, or esophagitis;Histoplasmosis, disseminated or extrapulmonary ; Isosporiasis, chronicintestinal (for more than 1 month) ;Kaposi's sarcoma ; Lymphoma Burkitt's,immunoblastic or primary brain ; Mycobacterium avium complex ;Mycobacterium, other species, disseminated or extrapulmonary ;Pneumocystis carinii pneumonia ; Pneumonia (recurrent) ; Progressivemultifocal leukoencephalopathy ;Salmonella septicemia (recurrent) ;Toxoplasmosis of the brain ; Tuberculosis ; Wasting syndrome due to HIV1
HIV AIDSIntroduction Search for a vaccine and a cure has beenelusive Anti Retroviral Drugs (ARVs) widely used.– NOT a cure– It can have serious side effects– Does not work for all patients First recorded case of HIV in 1984. AIDS pandemic has evolved into a majorfactor in national health, economic growthand national development. Life expectancy now stands at 62 years.Introductionlife expectancy in Kenya The market for life insurance products hasbeen clearly adjusted to the deal with thisnew reality.life 201020112012706050a40g30e20100year Regulatory intervention, Pricing, reservingand claims have clearly changed as aresult.Source: CIA World Factbook - accurate as of February 21, 20132
Government intervention Distribution of ARV and prophylaxis forpositive pregnant women . Campaigns for lifestyle change and safesex. As of December 2011, 6.2% of adultswere living with HIV – a 40% reductionsince 1995–1996.Current situation An estimated 49,126 people died of AIDSrelated causes in 2011, approx 35% of thefigure in 2002–2004. Encouraging! However, no cure in sight and newinfections are a concern. The risk stillremains.– Source: Kenya AIDS epidemic update 2012 by t assuranceTerm AssuranceWhole LifeAnnuity The Hiv Aids scourge has lowered thegeneral life expectancy reducing thedemand for annuities. They stand at only1% of products sold. Annuities with guarantees or higher ratesmay also do– SOURCE:3
ProductsLegislation Endowment assurance takes more than85% - good for policyholders seeking foran investment opportunity Unit linked policies may be a better choicefor the insurer and the insured within amarket with the HIV risk. Stands at 7% share - set to rise in future. HIV and AIDS Prevention and Control Act,2006 – no person shall be compelled to undergo a HIVtest or to disclose his HIV status for the purposeonly of gaining access to life insurance . AND the organization should devise a reasonablelimit of cover for which a proposer shall not berequired to disclose his HIV status.– SOURCE: Kenya Law Report No. 14 of 2006Result: Individual Life: many low sum Assuredpolicies – consequently:– Low penetration and high expense risk Group Life – most members covered up toFCL to avoid HIV testing– Thus a higher claims experienceOther Regulations Transition from Compliance BasedSupervision to Risk Based Supervision(RBS). RBS emphasizes more on understandingand anticipating the possible risks withinthe business plan e.g the HIV risk for LifeInsurers. 4
Reserving Use KE 2003-05 mortality tables in thecalculation of actuarial liabilities instead ofusing the a1949-52. Reflecting the Kenyan mortalityexperience more accurately including theeffect of Hiv Aids.Claims Group Life claims increased from Kshs4.43 billion in 2011 to Kshs 5.87 billion in2012, an increase of 32.5%. High FCL ,forced up by marketingpressure and anti selection due to limitedu/w. – high expenses and lower surpluses– Source: IRA Report 2012Ordinary Life claims Increased from Kshs 4.46 billion in 2011 toKshs 8.29 billion in 2012, an increase of85.9%. Of these, death claims are roughly13% OL not spared – previously exclusionclause used – challenge of cause of deathremains.Marketing Penetration at 1% for life insurance.– the legal restrictions in u/w and the stigmaassoc. with HIV testing HIV positive product introduced earlier inthe market did poorly – stigma and pricing! HIV Testing – an unpopular underwritingrequirements.– Source: IRA Report 20125
marketing Innovative products required to meet thechallenge. A large number of the questions in theProposal forms relate directly or indirectlyto possibilities of Hiv infection.– these questions may be an impediment and provide littleinformation.Surplus DistributionExpenses HIV has increased the underwritingexpenses at both new business andclaims.– HIV test and confirmation of cause of death(no one dies of HIV!) Staff and admin expenses are increased.Surplus Higher % retained surplus– Cushion against the risk of HIV AIDS claims?Bound to change as the situation improves– Prudence? Question of ability to meet PRE andincrease penetration!Source: AKI Report 20126
PricingWithdrawals Need to balance between equitable priceand competitive pressure. Of the total life ins benefits payments 50%were withdrawals and surrenders. GL most affected High withdrawals would be compoundedby the Hiv factor increasing the averagemortality rates. Individual life pricing has not beenchanged recently.– KE2003 is currently not required for pricing basis.CONCLUSIONQuestions Not Business as usual – HIV has shapedmuch of how the business runs. More investigation required – rates andproducts.7
market with the HIV risk. Stands at 7% share - set to rise in future. - Legislation HIV and AIDS Prevention and Control Act, 2006 - no person shall be compelled to undergo a HIV test or to disclose his HIV status for the purpose only of gaining access to life insurance . AND the organization should devise a reasonable
