Adrian Mak Actuary, Gen Re LifeHealth Australia. Presentation to the New Zealand Society of Actuaries Conference held in Napier 17 November 2004

Transcription

1 The Income Protection Express 2004 Adrian Mak Actuary, Gen Re LifeHealth Australia Presentation to the New Zealand Society of Actuaries Conference held in Napier 17 November 2004

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3 Data Disability benefits, not lives, not policies Individually underwritten business in New Zealand Investigation periods: and Incidence and termination Six companies (eight entities) Excludes business overheads cover Excludes ancillary benefits (eg, bed care, death) 548,265 benefit years and 4,938 claims over 6 years Requested data due by 1 May 2004 Late-reported claims significant Major changes in claim data

4 Participating companies market shares Non- Participating 21% AMP 6% Asteron 11% Westpac 6% AXA 12% Tower 6% Sovereign Group 38% Source: Investment Savings and Insurance Association of NZ Inc. Based on in-force annual premium at 31/12/2003 for replacement income risk

5 New claims in Sex (M/F) Occupation (WC/BC) Smoker (N/Y) Deferment Period (30d/90d/56d/Other) Benefit Period (To Age 60/65 or Year-Based) Benefit Type (Indemnity/Agreed Value) % 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

6 Occupation classification Occupation classification in this investigation Class A Professional, managerial, executive Class B White-collar, administration, clerical Class C Light manual duties, sales, supervisors of blue-collar workers, skilled technicians Class D Moderate manual duties, tradespersons Class E Heavy manual duties, hazardous work Equivalent standardised class may have changed since previous study Difficulty with some companies straddling two standard classes

7 Occupation Classes Some examples

8 Method of analysis Australian IAD89-93 as basis for expected experience Results weighted by number of benefits Partial claims and total claims given equal weight in incidence and termination Lump-sum settlements and ex-gratia payments Not comparable to earlier reports due to changes in methodology and data Claim durations are days during the investigation period, not true claim length Benefits expired not counted as terminations Choice of termination rate intervals Claims within deferment period count toward incidence

9 For every action there is an equal and opposite reaction Ratio (%) of actual to expected number of new claims by deferment period and investigation period Deferment Period days 84 (2) 81 (2) 90-days 112 (7) 116 (5) All 83 (2) 79 (2) The increase for 90-day eroded all improvement for 30-day

10 White-collar vs. Blue-collar Ratio (%) of actual to expected number of new claims by occupation class and investigation period Occupation Class A 85 (4) 96 (4) B 106 (4) 92 (3) C 112 (9) 75 (6) D 67 (3) 62 (2) E 67 (4) 63 (4) White-collar (A-B) 97 (3) 93 (2) Blue-collar (C-E) 71 (2) 63 (2) Less improvement in white-collar than blue-collar

11 One small step in incidence Trend in ratio (%) of actual to expected number of new claims for all deferment periods by sex and event year Male A/E Female A/E Actual vs. Expected 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Event Year

12 one giant leap in terminations Ratio (%) of actual to expected number of claims closed by month of disablement and investigation period 120% 100% 80% 60% 40% 20% 0% Month of disablement

13 Claim duration Ratio (%) of actual to expected claim length by deferment period and investigation period Deferment Period days days Ratio (%) of actual to expected claim length by occupation class and investigation period Occupation Class White-collar Blue-collar

14 Paid ratio Paid Ratio = monthly amount paid. monthly amount insured Cannot exceed 100% Sources of claim offset Partial disability payments Payments under indemnity policies Payments from insured's employer, superannuation plan, other disability policies or government

15 Claim offset Paid ratio (%) by cause of claim and investigation period Cause of Claim Accident Sickness All Paid ratio by claim cause and occupation class in Occupation Class Accident Sickness Total A B C D E

16 Claim cost plummeted Contribution of each component to total change in claim cost from to Male A/E Female A/E 5% 0% Incidence Duration Paid Ratio Cost 1% Change in A/E Result -5% -10% -15% -20% -25% -2% -11% -10% -24% -3% -14% -30% -35% -31%

17 Claim cost by deferment period Ratio (%) of actual cost of claim to expected for males by component, deferment period and investigation period Component of 30 day 90 day Claim cost Incidence Duration Paid Ratio Claim Cost

18 The vintage years Ratio (%) of actual to expected claim cost for males by underwriting year and investigation period No. Terminated in Actual vs. Expected Claim Cost 250% 200% 150% 100% 50% Number of Claims Terminated in % Underwriting Year

19 Does size matter? Comparison of ratios (%) of actual to expected results in weighted by numbers and amounts 160% 140% 120% 100% 80% 60% Numbers Amounts 40% 20% 0% Incidence Duration Paid Ratio Cost

20 SUPER SIZE ME 160% Ratios (%) of actual to expected results in by sum insured bands for white-collar males 140% 120% 100% 80% 60% 40% 20% 0% Insured Benefit per Month Incidence Duration Paid Ratio Cost

21 SUPER SIZE ME 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% Ratios (%) of actual to expected results in by sum insured bands for blue-collar males Insured Benefit per Month Incidence Duration Paid Ratio Cost

22 When Harry Met Sally Ratio of female actual to expected number of new claims over ratio of male actual to expected (using male assumptions)

23 Now you see it Occupation Class White-collar 112 Blue-collar 121 All Occupations 115 Ratio of female actual to expected claim length over ratio of male actual to expected (using male assumptions)

24 now you don t Occupation Class White-collar 97 Blue-collar 104 All Occupations 99 Ratio of female actual to expected claim length over ratio of male actual to expected (using male assumptions)

25 Occupation, occupation, occupation!!! Ratio (%) of actual to expected (using Class A) number of new claims expressed as a percentage of Class A in Occupation Class Male Female A B 96 (6) 106 (9) C 112 (11) 107 (26) D 168 (10) 126 (18) E 200 (16) 115 (33) Weighted Average 121 (6) 106 (9) White-collar (A-B) 98 (5) 104 (9) Blue-collar (C-E) 164 (9) 120 (15)

26 Slimmer occupation relativities Ratio (%) of actual to expected (using Class A) number of new claims by occupation class and investigation period expressed as percentage of Class A Occupation Class A B 124 (7) 95 (5) C 199 (18) 118 (11) D 214 (13) 173 (9) E 261 (21) 207 (16) Weighted Average 145 (7) 116 (5) White-collar (A-B) 113 (6) 97 (4) Blue-collar (C-E) 220 (12) 169 (8)

27 Occupational bracket creep Means insurers tendency over time to put more risks into classes toward white-collar Effect is deterioration (or lower improvement) in white-collar and less deterioration (or more improvement) in blue-collar 120% 100% Actual vs. Expected Incidence 80% 60% 40% 20% % White-collar males Blue-collar males

28 Warning: smoking hazardous to your health Ratio (%) of actual to expected number of new claims for smokers over non-smokers in Occupation Class Male Female All White-collar 142 (13) 135 (16) 138 (10) Blue-collar 123 (10) 117 (31) 122 (10) All Occupation Classes 122 (7) 129 (14) 124 (6) Ratio (%) of actual to expected claim cost for smokers over non-smokers in Occupation Class Male Female All White-collar Blue-collar All Occupation Classes

29 Cause of Claim Experience by cause of claim Ratio (%) of actual to expected number of new claims by cause, sex and investigation period Male Female Accident 76 (3) 82 (3) 50 (6) 72 (7) Sickness 89 (3) 82 (2) 88 (4) 72 (3) Ratio (%) of actual to expected claim length by cause, sex and investigation period Cause of Claim Male Female Accident Sickness

30 Major claim causes in Males Females Accidents 37% Neoplasms 11% Nervous 4% Digestive 4% Other 12% Mental 26% Digestive 4% Neoplasms 15% Nervous 4% Circulatory 10% Other 7% Musculo 10% Musculo 11% Mental 16% Accidents 18% Genitourinary 11%

31 Longest male sickness claims Ratio (%) of actual to expected claim length for males 200% 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% Nervous Mental Musculoskeletal Neoplasms Circulatory Digestive

32 Longest female sickness claims Ratio (%) of actual to expected claim length for females 220% 200% 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% Musculoskeletal Neoplasms Mental Genitourinary

33 Agreed value: more claims 100% 90% 80% 70% 60% 50% Ratio (%) of actual to expected number of new claims by benefit type and sex 91% 81% 73% 78% 86% 80% 40% 30% 20% 10% 0% Agreed Value Indemnity Male Female All

34 but shorter claims Ratio (%) of actual to expected claim length by benefit type and sex 250% 200% 175% 192% 217% 174% 174% 198% 150% 100% 50% 0% Agreed Value Indemnity Male Female All

35 Paid ratio higher for agreed value 140% 120% 100% 80% 60% 40% 20% 0% Overall cost is 16% more than indemnity benefits 115% 99% 76% 70% 70% 57% Agreed Value Indemnity White-collar PR Blue-collar PR Claim cost

36 Mind the gap Results for all categories of business combined X=Market Avg=78 Incidence 140% Bubbles show claim cost 130% 120% 110% 100% 90% 80% 65 x % 60% 50% 40% % Duration 20% 80% 90% 100% 110% 120% 130% 140% 150% 160% 170% 180% 190% 200%

37 Mind your own business Results for white-collar male 30-day deferment period Incidence 160% X=Market Avg= % 145 Bubbles show claim cost 120% 100% 93 x % 60% % 46 Duration 20% 60% 80% 100% 120% 140% 160% 180% 200% 220%

38 IP experience is a moving target

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