Prudential Chief Underwriter: Company Is First to Offer Life Coverage for HIV-Positive Clients
December 8, 2015 by Dennis Gorski, managing editor-online, BestWeek: Dennis.Gorski@ambest.com)
NEWARK, N.J. – Prudential Financial said it has become the first U.S. insurer to underwrite standard convertible term life policies for HIV-positive adults who meet various health criteria.
The policies offer 10-year and 15-year coverage, McFarland said. Face amounts range from $100,000 to $2.5 million. They’re available to U.S. citizens and permanent residents who are 30 to 60 years old, who did not get the HIV virus from intravenous drug use or transfusions, and whose blood count and viral load are within acceptable limits; some other criteria apply as well, he said.
McFarland said he’d been trying for years to find a way to underwrite HIV-positive adults because their longevity had grown by decades due to medical advances. Such longevity was the key to pricing risk, but he didn’t have enough reliable data to convert into statistical analyses that would help him develop the actuarial tables on which to price the risk.
“I kept hitting roadblocks, because I lacked the mortality data and lacked a credible profile” of HIV-positive adults, he noted.”I couldn’t find all the keys to the locks.”
Andrew Terrell, a Bear Stearns principal who co-headed the insurance-linked securities desk, had the numbers McFarland needed. He had been analyzing data on chronic condition longevity and realized HIV-positive people “had greater longevity than people were giving them credit for.”
Terrell’s interest was piqued after an HIV-positive acquaintance failed to get life insurance some years ago. Terrell knew he had the ammunition to overcome insurers’ refusal to insure these individuals. But he needed someone to listen.
Then he met fellow entrepreneur Bill Grant, and they founded Aequalis, an New York-based advocacy group for underserved insurance markets, in 2011. Grant was like-minded: “My personal motivation was to impact stigma. I understand it firsthand,” having lost two loved ones to AIDS, he said.
Terrell and Grant worked with Munich Re to refine Terrell’s longevity data. “They looked at our data and discovered they were actually reinsuring 55,000 HIV lives in South Africa and Europe,” Terrell recalled.
The data was ready for presentation to a carrier, and in April 2014, Grant used personal contacts and Munich Re’s team to reach decision-makers inside Prudential, which was a Munich Re client company. Aequalis met McFarland within two weeks, and suddenly both sides had found the perfect partner.
“We discovered Mike was extremely ‘up’ the learning curve on what was going on and what the trends were and what we were talking about,” Grant said. “Prudential stood shoulder to shoulder and already had the mindset and had already been looking, thinking and considering” how to write coverage for the HIV-positive market.
McFarland said the term policies are available in all but about five states, and those states are expected to permit sales in the near future.
But, Grant explained, agents who want to offer the policies to clients first need to be educated about HIV and the underwriting that goes into the policies. ” Now is when the real work starts,” Grant said. “Now we have to educate advisers and agents. Any agent who wants to participate has to be vetted. This is very serious. There’s a training regimen, there’s a lot of sensitivity and awareness training.”
He added, “For agents who say “I’d like to have that arrow in my quiver” we have a process to take them through, a group of advisers to put together, training so that they understand all the nuances of the underwriting.”
Both McFarland and Aequalis expect to continue their collaboration, and to refine the underwriting as experience dictates.
“The next step is to build things out,” Terrell said. “Yes there are 1.2 million people living with HIV in the U.S. but of the addressable market, those who have the financial need, who meet the underwriting criteria, it’s probably closer to 150,000.”
“I think where this becomes interesting is everyone who is living with HIV has partners who are non-HIV, friends, family. Then there are the allies in the LGBT community — they’re all interested in buying regular insurance. So I think we’re going to develop out where we’re not just selling HIV policies, but partners are going to want to support Prudential by buying a regular term policy. So I think there’s organic growth there.”
Emails to MetLife, New York Life and American International Group for additional comment were not immediately returned.
California Insurance Commissioner Dave Jones, who regulates the largest insurance market in the United States, commended Prudential. “Prudential’s decision is a historic and significant step,” Jones said in a statement. “Acknowledging that HIV is a chronic but manageable condition is the right thing to do.”
