Health Management

Insight, Knowledge-Center

This article was published in Full Cover magazine, issue number 4

Striking a difficult balance between rising life expectancy and increasing health costs

Health is a complex, passion-driven subject. We’ve noted in the past how the increase in life expectancy can be explained by (among other root causes) the scientific development that permeates new medical technology. Such development is fueled in turn by the benefits it generates – which reflect on increased life expectancy – and also by a personal wish for good health. As a consequence, we face the high cost of maintaining a healthy life or healthful living standards, and financing difficulties. How can we solve this problem without giving up on past gains?

Life expectancy for the world’s population soared from 48 years in 1955 to 68 in 2009 (WORLD HEALTH STATISTICS 2011 – WHO) and is expected to reach 73 years by 2025. 2009 data show that 19 countries already boast a mean life expectancy above 80 years.
This increase in life expectancy can be found in the following factors:

  • Socio-economic development
  • Better sewage and sanitation, general improvement of water for human consumption
  • Creation and expansion of healthcare services, new therapies, new diagnostic tools and processes, development of existing procedures for treatment of new conditions, new customer service proceduresand other innovations. These items are often included in the more general term, “medical technology.”

Economic development and sanitary conditions, lead to reduced mortality from infectious disease. These most often stem from public health policies with a strong emphasis on prevention. Technological development is present in almost every field of medicine – medical specialty care, service providers, health plans & health insurance, medical research & clinical trial companies, public health policymakers, among others – and is an important factor in diagnostic and treatment innovation. On the flipside, technological development does increase health costs.

In 2008, per capita health costs in the world were US$ 854,00 against US$ 458,00 in the year 2000. Of that total, governments bore 60% of expenses, private organizations bore 40%. It is interesting to note that, in the year 2000, governments were responsible for 56% of health expenditures. (WORLD HEALTH STATISTICS – 2011 – WHO) Individual medical premiums grew by 147% in 13 years, from US2,196,00 in 1999 to US$ 5,429,00 in the United States. (Employer Health Benefits – 2011 – The Kaiser Family Foundation – AND -Health Research & Educational Trust) The variation in health costs has systematically achieved larger volumes than other economic sectors. Average annual growth for such costs has been 9,8% in the US since 1970, which is 2,5 points above the growth of GDP in the US.

Outside the United States, other countries have also devoted a larger percentage of their GDP to health expenditures. However, significant health expenditures do not necessarily mean good service provision. The same procedures will represent different costs from one country to another, maybe even from one intra-national region to another, although less expensive procedures may deliver similar or even better results. As a result, there is a heated debate to determine causes and solutions to rising health costs. Such a debate is urgent, as the number of people without access to healthcare is on the increase. A few factors have come to the fore thanks to such debates:

  • medical services focus on treatment, rather than prevention.
  • rendering of medical services which are unnecessary, insufficient or inefficient.
  • medical services are expensive.
  • high administrative cost.

Preventative services were, for a long time, limited to the improvement of sanitary conditions. With increased life expectancy, the focus shifted to chronic conditions and the prevalent model was centered on treating such conditions – the most frequent among them being chronic heart conditions stemming mostly from high blood pressure, diabetes and obesity. The need to establish early diagnostic methods for such conditions became apparent, and thus arose population screening. However, such screening focuses on finding patients for early treatment, not on preventative measures. Even that process has been influenced by technological innovation and its efficacy is hotly debated (Over-Diagnosed – Making People Sick in The Pursuit of Health – DR. H.Gilbert Welch – 2011).

Efforts to improve prevention (changing diets in schools and daycare centers, anti-smoking campaigns, advocacy of physical exercise, among others) match the common sense belief that it is better to prevent. Self-generated demand – demand for diagnosis and treatment – creates a positive incentive that may bolster inadequate use or overuse of available technologies. Also, hospitals focus only on servicing market demand and staying competitive while they disregard a fully integrated vision of their users’ health. Finally, specialties for which demand is lower at a given hospital facility must be at the beginning of a learning curve and elicit more resources for adequate diagnosis and treatment. To minimize the problems posed by that cycle, external controls are put in place: Service quality certificates, internal and external audits, accountability to government and health plans, detailed forms ensuring warranties from all service providers, double-checks of the payer, and others. This administrative cost is encapsulated in the cost of services rendered. We believe a few items are important in this universe we call Health Management:

Service must be guided by the strictest ethical principles.

Ethics must guide every step, from choosing the best treatment available to health advocacy programs which will in fact bring tangible benefits to a given swath of the population. Only through the lens of principle can existing incentives be properly analyzed.

Special attention must be given to the ends of the risk curve – serious cases and health advocacy programs.

Patients with serious conditions can greatly improve their quality of life if they are treated according to the best available practices in specialty units for the treatment of said patients’ conditions. There are also major benefits to cases beyond clinical help, where the patients’ and their relatives’ comfort becomes the key factor. On this matter, the uncomplicated lens of general medicine creates a hub for all the information necessary to quick, effective decision-making. Health advocacy programs are important to diminish risk and the number of people who might reach the ‘serious’ end of the curve. Within that group, people must be adequately monitored and made aware of their own responsibility with regards to their health.

Employment of insurance risk analysis techniques within healthcare.

Risk analysis techniques widen the focus on population segments. By doing that our analysis factors in the collective best interest of a given group in order to determine the best service provision for a given individual. Although the problem is complex, timely efforts can change things for the best. It is not easy, but perfectly achievable.

Author: Rildo Silva, Director at MDS Brazil

MDS spoke at the RIMS in Philadelphia, USA

Activities, Insight

MDS spoke in Philadelphia in 2012 at the Rims

Jose Manuel Fonseca, MDS Holdings CEO, was a keynote speaker at the RIMS conference. It is a rare privilege for a non american speaker and a recognition of Jose Manuel Fonseca’s expertise and longstanding contribution to the insurance industry. Here are the key messages that have been conveyed in his speech.
Latin America has an overall population of 590+ million people. The continent enjoys a rapid economic growth, multiple commodities and natural resources, and offers a large domestic consumer market. Each country contributes with its specific attributes: Argentina with its natural gas & dynamic domestic market, Brazil being a spotlight of the international community, Chile with its business friendly environment, Columbia attracting increasingly more foreign investments, Peru gaining confidence and displaying a positive outlook, and Mexico boasting a solid economic performance and a steady growth.
However, when approaching these markets, one needs to understand that we’re still navigating in a fast changing environment with massive business opportunities assorted with unique risks and challenges: the economic inequality is a daily reality, the political corruption is around the corner, there’s still a great deal of illicit trade and organized crime, there’s an overwhelming pressure inherent to the megacities and it’s a permanent change when it comes to insurance regulations. To leverage the massive opportunities that Latin America has to offer, companies should learn to manage the worse and aim for the better in an environment that needs to be developed around few initiatives such as: creating “investment friendly” environments, strengthening the local insurance markets, offering to the population low cost micro-insurance, evolving from a risk transfer to a risk mgmt culture for the businesses and focusing further on Employees Benefits.
Overall, Jose Manuel Fonseca’s speech was extremely well received by the audience and was recognized as a much relevant contribution to the RIMS 2012 conference.

Supply Chain Problems and Insurer Solutions

Insight, Perspectives

This perspective was published in Insurance Insight on August 30, 2012

There is a common belief that supply chain claims are linked most often to natural disasters, but research shows that this is not true. Jacqueline Legrand explains why highlighting this myth to customers can go a long way to mitigate against the real problems. The fact that a growing number of today’s businesses are embracing globalisation means there is a wealth of opportunity for collaborators and investors. Potential clients, too, can benefit from this movement through the increased availability of innovative and cost-effective products and services. Yet for all the exciting advantages that globalisation offers, there are serious risks to consider, particularly in terms of the smooth operation of the supply chain.

This issue is becoming increasingly prominent around the world as companies experience greater than ever disruptions to business when supply chain problems exist. These problems can be especially challenging in Europe, where border crossings are frequent, regulations often change, and business leaders may not pay as much attention to supply chain demands as their more domestically focused global peers.

Not business as usual: When supply chain concerns arise and claims are made, many have the impression that such losses are simply a normal part of today’s business environment. Interestingly, however, this is decidedly not the case, as demonstrated by a study conducted this spring by London’s TT Club, a mutual insurer focused on meeting the needs of freight, rail and ship operators. Speaking at a conference in Hong Kong, representative Lawrence Jones revealed a wealth of statistical data that opened the eyes of many companies – and which deserves widespread repetition and discussion. The study was based on the firm’s substantial $120m claims. “Where border crossings are frequent, regulations often change, and business leaders may not pay as much attention to supply chain demands as their more domestically focused global peers.”

Human error: During events such as the earthquake and tsunami in Japan in March 2011, companies across Europe experienced serious disruptions to business as a result of problems with the international supply chain. But, as much as it may seem that events like Japan’s dual disasters are the primary forces behind today’s disruptions, and that supply chain problems are largely unavoidable, TT Club’s findings show that human error is far more often to blame. One of the most startling figures to be found among TT Club’s data focuses on the percentage of incidents that could have been avoided, which came in at a huge 80%. This considerably large figure suggests that, while many European businesses are confident in the quality of their operations and policies, and content to let their insurance arrangements take charge in case of problems, a great deal of time, energy and funds for insurance premiums could in fact be saved if attitudes were to change.

Poor maintenance: In fact, the study found that 63% of the total cost of claims was attributable to operational issues. Piling on top of this figure was another third of the total cost of claims linked to poor or absent maintenance. In the end, only 4% of the cost of the TT Club’s claims could be traced back to bad weather. This major discrepancy between the traditional conception of what causes supply chain problems and the modern reality calls for a serious rethink of how today’s businesses operate. Many of Europe’s strong business entities realise that superior performance can drive success in a competitive market, but critical areas of their operations are sometimes overlooked. Sub-par operations can stem from numerous sources, such as infrequent policy review, poor oversight or a lack of collaboration and input among a company’s leadership team. “In the end, only 4% of the cost of the TT Club’s claims could be traced back to bad weather.”

Common problems: The study found that issues such as inadequate paperwork handling leading to customs fines, improper cargo release, bad stowage and inattentive maintenance were common problems among firms filing large claims related to the supply chain. Fire was also found to have a significant impact on claims, as the outbreak of flames caused by poor storage and similar issues was commonly cited as a source of loss and disruption. Through bolstering these areas of business and searching for new ways to perform quality checks, businesses may be able to prevent a significant portion of losses sustained.

Quality training: Developing and deploying quality training programmes to ensure greater employee understanding of regulations, safety issues and best practices is one avenue towards lowered supply chain losses identified by TT Club. Along with such initiatives, today’s businesses, particularly in Europe, can develop proper protocols for reviewing new legislation and guidelines for international shipping and trade, which is likely to lead to less disruption on account of hold-ups and fine assessments at borders. The insurance world, of course, has a number of tools designed to help businesses mitigate the risks they face while working with today’s delicate European supply chain. Yet a stronger attention to preventative measures should be adopted by businesses that want to achieve lower premiums, a better reputation and a less stressful mode of operation. “By working together to provide quality counsel in addition to basic and specialised insurance products, we can help lead the way towards a more secure future.”

Inform and inspire: The effort to inform and inspire demonstrated by TT Club is an excellent example of the responsibility with which modern insurance authorities are charged. The classic role of insurers to create effective risk mitigation products and services is still a central requirement for today’s insurance professionals. As the consequences of business disruption and other problems related to the supply chain can be devastating, falling back on a reliable, dedicated insurer can be invaluable. Clearly, TT Club has recognised that, while such duties may be at the core of its work, it must also work towards delivering meaningful advice and outreach in order to become an essential part of the modern European business environment. We’ve watched TT Club’s recent efforts with admiration and a great sense of fellowship. As our involvement in Brokerslink consistently drives us towards optimising our collaboration potential across the continent, we realise that, by working together to provide quality counsel in addition to basic and specialised insurance products, we can help lead the way towards a more secure future. To support and improve European business, we as insurers must follow TT Club’s example and analyse sources of risk in addition to providing mitigation.

Jacqueline Legrand is chief operating officer at MDS Holdings 


Better Hiring, Better Horizons

Insight, Perspectives

This artlicle was published on

Pursuing a career in insurance has been a challenging course for many people over the last handful of years, from entry-level to executive positions. A difficult economic climate and conservative hiring practices have led some to return to their studies, or even to seek jobs in new and unfamiliar fields.

But with several indicators suggesting that the tide may be turning on hiring trends, re-kindling passion for insurance is a wise move. In fact, a recent survey of insurers by The Jacobson Group found that fifty one percent of those surveyed plan to increase hiring in 2012; a number sure to revive hope in those who have been struggling to find the right placement.

With demand for underwriters, claims specialists, and tech experts rising in particular, scores of professionals are sure to find new opportunities in the year to come. As we work towards replenishing our workforce, developing new partnerships and products, and forging ahead in a calmer if not entirely pacified market, we’re certain we’ll have the pleasure of working with some of those who haven’t had the best hiring luck in recent years.

We hope to help create many new careers, and to help bring enthusiasm for insurance back to a field we think is ready to thrive again.

Author: Sandra Pereira, Director at MDS