Risk assessment

There is a tendency to reduce health questions in application forms and Sales forces often demand or support this development. To balance risks and underwriting requirements automated underwriting systems may be a solution.

Such systems consist of a set of specific drill down questions related to disclosed heath conditions. They are available for all kinds of personal insurance.

The higher the risk the more detailed the underwriting process and this statement is valid for systems and manual processes.

In cooperation with Triangulum-Ag, VMS Hannover has developed numerous system solutions for different lines of business and integration depths. In specific solutions, the 100% threshold for final processing at the point of sale was even reached (Opti 5, Barmenia, adcuri). The first “second pass system” with automated processing of incoming medical reports was also put into production.

Efficient systems generate decisions in one step based on the same set of questions for all products. Even those not applied for but finally without extra rating.

The number of applications which are subject to automated underwriting for systems at point of sale depend on complexity of a case. Complexity could be classified in stages. The simplest level involves application forms without any disclosed medical condition. The highest level could be described as automated second pass system. Several system solutions are possible in between the two extreme levels. These are imaged as complexity pyramid.

(*) The complexity pyramid was first introduced in presentations on automated underwriting at Hannover Re’s POS by Dr. Sittaro in 2002 and has been further developed since then. The latest version is from 2018.

Benefit check

Main focus on the following products

  • Personal injury liability insurance

  • Claims in personal accident insurance

  • Claims in functional disability insurance (FDI)

  • Systems for automatic claim verification in accident insurance

One focus of claims service from VMS is liability in personal injury or accident insurance. In accident insurance, this includes FDI (functional disability insurance) benefit cases. Several thousand cases have been processed here in recent years.

A large part of the personal injury claims in liability insurance and accident insurance can be processed automatically. Here, VMS, in cooperation with Triangulum AG, has operational systems that can decision even complex cases.

Product development

Especially in the area of extended personal accident insurance, VMS has implemented numerous product solutions and further developments of products in recent years. These include:

  • Functional disability (FDI)

  • Individual personal accident insurance

  • Personal accident insurance in the age group 70 plus

Functional disability is an insurance cover which is based on degree of functional impairment due to disease or accident. The ability to perform a certain occupation is not the leading issue of this insurance. For almost all parts of the body – regardless of whether relating to musculoskeletal or organ functions – medical classification or staging levels determine the degree of functional impairment. These medical stages are the basis for definition of claims. Claims assessment itself becomes simple and fast. The insurance covers approximately 80 % of an established insurance cover for TPD own occupation.

FIV: Deckungsumfänge im Vergleich
Unterschiede Berufsfähigkeit zu Funktionsinvalidität

Differences Occupational Disability to Functional Disability

Individual accident insurance generates accident products that are fully customized to a customer’s wishes. Factors such as type of continental scale, accelerated benefit , specific riders and additional coverage inclusions are individually combined to form a personal accident policy. This is only possible if all coverage elements are actuarially calculated. In this area, we cooperate closely with the Institute of Finance and Actuarial Science in Ulm.

Personal accident insurance might be considered as an unexciting insurance product but as soon as offered to the age group 70 plus it would meet a huge market. Accidents in that age group are a leading cause of advanced disability, mobility impairment and cause of long term care. Incidence rates are high.

In cooperation with our assistance partner several solutions were developed and introduced in the past years.

Strukturen der Unfallversicherung für ältere Menschen

Future risks Accident insurance

Invoice auditing and medical necessity testing in private health insurance

VMS works very closely with Medexo GmbH in the auditing of private health insurance statements and the necessity testing of medical measures.

Medexo has more than 80 proven medical specialists from almost all areas of expertise, enabling it to carry out necessity audits at the highest level.

In 2018, the MDK Nordrhein recovered around 307 million euros from hospitals by reviewing conspicuous invoices. Extrapolated to the federal territory, this means: The approximately 2,000 hospitals could have overbilled health insurers by up to three billion euros last year. Invoice audits therefore mean cash money here.

(Sources: Trade Journal: False billing by hospitals | PWC: Billing fraud often goes undetected – in german)

Longevity risks and underwriting


Although enhanced annuities (EAs) have been established in the U.K. market for over 15 years, comparable products have barely gained a foothold in other countries. Yet the idea is plausible and intriguing. The increased annuity in this product line comes about through the simple fact that when a single premium is paid for annuity insurance, individual life expectancy is taken into account as an additional factor when calculating the amount of the annuity. Inevitably, sick individuals with a shortened life expectancy receive a higher pension.

Historically, different variants of EA have emerged. One of the earliest forms was the smoker annuity based on the commonly known fact that smokers have a reduced life expectancy and are therefore preferred customers of pension insurance. Later, “lifestyle” annuities emerged, which used cardiovascular risk factors as the basis for assessing life expectancy. Of particular interest is the variant of EA that deals with the remaining life expectancy of persons in need of long-term care – even nursing home residents (immediate needs annuity). The insured interest is the guarantee for an affected person in need of care to be able to spend the remaining life span in the familiar and demanding nursing home.

The cornerstone of a preferred annuity is a medical underwriting system for remaining life expectancy, an appropriate environment for the product, and an actuarial method that transfers medical statistics and underwriting experience into a life table.

Life settlements are colloquially known as “second-hand policies” or “secondary market life policies”. The service of VMS is based on the experience gained over many years in the UK EA market and the intensive examination of residual life expectations of elderly people in long-term care insurance. Apart from rare individual policies, this service is applied to ILS solutions (Insurance Linked Securities). Here, the risks from insurance policies are made available to investors via fund solutions. VMS cooperates here with Plenum Investments AG Zurich.

The same medical approach is also used for the conversion of real estate property into a life annuity.

The determination of the remaining life expectancy of seriously injured persons in general liability insurance or motor vehicle liability insurance is useful when settlements or compromises are discussed or reviews of individual loss reserves are to be made.

VMS performs these evaluations primarily for German motor insurance companies. The basis of the evaluation is medical experience with similar longevity issues and the systematic use of medical studies and publications.

The VMS expertise

We support companies with risk analyses, medical forecasts and systems engineering implementations.