Risk Insurance Definitions of the Critical Illness benefits. Dr. Eric Starke Insurance Medical Advisor

Transcription

1 Risk Insurance Definitions of the Critical Illness benefits Dr. Eric Starke Insurance Medical Advisor

2 Why a Critical Illness benefit? A living benefit for a dreaded disease. Dr. Barnard once said the outcome of a major health crisis is more likely to be survival than death. but having survived, the cost of living is greater than the cost of dying.

3 LOA (ASISA) Code of Good Practice for Dread Disease Dread disease insurance is not intended to cover loss of income, or occupational disability nor is it intended to indemnify the assured against the cost of medical procedures or treatments. It is intended to cover the cost of adaptation to a new life style (e.g. life in a wheel chair etc.) and the loss of insurability.

4 Remember the old Trauma product? Minimal Claim events; one design; same definitions. Heart attack, Coronary artery bypass, Stroke, Cancer, Paraplegia, Quadriplegia, Coma, Burns, Renal failure, Blindness, Multiple sclerosis.

5 2001: New generation Critical Illness products Multiple Claim events; multiple designs; multiple definitions. Over 200 claim events with some companies. Up to four different products with different designs for a single company. The start of the Tiering concept.

6 Problem with the new generation products Too complex Causes confusion

7 2009: Industry Standardised Definitions (SCIDEP) Cancer Heart attack Coronary artery bypass Stroke

8 Letter received from a brokerage

9 Part of the 222 listed conditions:

10 Risk Insurance concept Point of sale Claim Premium Marketing material (Transparency) Underwriting requirements Underwriter Quality Experience Client service Training Access to medical advisor Re-insurers Premium patterns Gaurenteed periods Annual benefit increase Intergrators Definitions Product design Claims experience (Stats) Claims Assessment quality experience expertise client service Ombudsman

11 Relationship between claim event, definition and design? Claim event Definition Design Cerebral malaria Diffuse symmetrical encephalopathy, i.e. unarousable coma accompanied by vital organ dysfunction, requiring ICU admission. A specialist physician must confirm the diagnosis. (% payment) Incidence (statistics) 100% payment Probability of getting Malaria when living in Cape Town? How many people with malaria get cerebral malaria?

12 Why a definition?

13 Evolution of a Heart Attack Stable Angina Micro infarction Transmural infarction Healthy Unstable Angina Sub-endocardial infarction Death

14 How important is a definition?

15 Example - Stroke Standardised Definition

16 Example - Stroke Standardised Definition

17 Example - Stroke Standardised Definition

18 Non-standardised Definition Different definition for a 100% payment Example - Parkinson s Company A Definition: Parkinson s Disease, assessed according to the Living Lifestyle ADL table (permanent failure of 1 major or 4 moderate categories).

19 Activities of Daily Living Table (ADL) for Brain and Cerebrovascular system Major Moderate Mild

20 Non-standardised Definition Different definition for a 100% payment Example - Parkinson s Company B Definition: A neurologist must confirm a clinical diagnosis of Parkinson s disease, with advanced stage of rigidity, abnormal gait and uncontrollable tremor despite optimal treatment.

21 Non-standardised Definition Different definition for a 100% payment Example - Parkinson s Company C Definition: Unequivocal diagnosis of Parkinson s disease must be provided by a consultant neurologist where the condition: Cannot be controlled with medication after at least a 6 month trial of various appropriate standard treatment regimes, Shows signs of progressive impairment Shows gait instability with rigidity resulting in freezing and akinesia.

22 Why a specific design?

23 General design Example: 14 day survival period

24 How important is the design?

25 Design Core vs. Tiering Simplicity vs. Complexity

26 Core Concept Company A (2 different products) Product 1 Claim event % of the cover amount Cancer 100 Myocardial infarction 100 Stroke 100 Coronary artery bypass graft (CABG) Up to three coronary arteries 50 More than three coronary arteries 75

27 Company A Product 2 Claim event % of the cover amount Cancer 100 Myocardial infarction 100 Heart valve surgery 100 Aortic artery surgery 100 Arrhythmia 25 Cardiomyopathy Any type of cardiomyopathy on optimal treatment with functional impairment to the degree of New York Heart Association (NYHA) class IV shortness of breath Any type of cardiomyopathy on optimal treatment with functional impairment to the degree of NYHA class III shortness of breath, and or less metabolic equivalents (METS) on a maximal effort test 50 Stroke 100

28 Company A Blindness Claim event Total and irreversible loss of vision in two eyes, or Irreversible visual acuity loss in two eyes with Snellen equivalent of 6/30 after correction, or worse % of the cover amount Total and irreversible loss of vision in one eye 25 Organ transplant 100 Renal failure 100 Liver failure 100 End-stage lung disease 100 Coronary artery surgery Bypass graft 100 Angioplasty 25 Sero-positive rheumatoid arthritis 100 Multiple sclerosis 100 Parkinson s disease

29 Company A

30 Core plus Tiering Concept Company B (4 different products) Product:

31 Core plus Tiering Concept Company C Product:

32 Company C Product:

33 Only a Tiering Concept Company D Category 1 The Severe Illness Benefit includes the following, any of which may be chosen individually: Heart and Artery Benefit Cancer Benefit Nervous System Benefit Respiratory Diseases Benefit Gastrointestinal Benefit Urogenital Tract and Kidney Benefit Connective Tissue Disease Benefit Premiums will only be paid for the specific Severe Illness Benefits selected.

34 Company D Category 2 If all of the previous (Category 1) Severe Illness Benefits are selected, the following severe illnesses are automatically covered as well: Advanced AIDS/Accidental HIV Benefit Eye Benefit Ear, Nose and Throat Benefit Endocrine and Metabolic Diseases Benefit Musculoskeletal Benefit

35 Company D There are seven severity levels used to determine benefit payments. These levels have been set to ensure that benefit payments provide adequate cover for the impact that the severe illness is expected to have on your lifestyle. The severity levels are as follows: Severity level A: Pays 100% of the benefit cover Severity level B: Pays 75% of the benefit cover Severity level C: Pays 50% of the benefit cover Severity level D: Pays 25% of the benefit cover Severity level E: Pays 15% of the benefit cover Severity level F: Pays 10% of the benefit cover Severity level G: Pays 5% of the benefit cover Cover may be selected for Severity levels A-D (Comprehensive) or Severity Levels A-G (Comprehensive PLUS)

36 Company D e.g. Cancer benefit

37 Design The SCIDEP Design (4x4 Grid) The quotation or contract must state what percentages the insurer will pay out for the sixteen standard definitions. Heart attack CABG Stroke Cancer Severity levels Event A B C D Most severe Moderate impairment Mild impairment Full recovery

38 The SCIDEP Design (4x4 Grid) Design

39 Double Dipping Enucleation of the eye (25%) (75%) Partial cystectomy (25%) Bilateral orchidectomy (15%) Removal of the lung (100%) Amputation of the penis - partial (25%) - total (100%)

40 Looking at the Critical Illness benefits of the different companies then the conclusion is: The claim events differ (except for SCIDEP) The definitions differ (except for SCIDEP) The product designs differ The number of claim events differ Therefore: You cannot compare premiums You cannot compare underwriting terms

41 Lesson to be learnt You cannot buy a critical illness benefit on premium only. You cannot buy a critical illness benefit on the listed claim events only. You cannot buy a critical illness benefit by looking at the comprehensiveness of the product only. Think definition, design and likelihood of event happening.

42 Letter received from a brokerage

43 Part of the 222 listed conditions:

44 In conclusion: Definition, Design, Double dipping and the Probability of an event happening are the keys to unlock the mysteries of a critical illness product.

45 Thank you for your attention Questions?