Critical Illness Versicherung - eine internationale Übersicht. Stefan König R&D Centre Disability and Critical Illness

Transcription

1 Critical Illness Versicherung - eine internationale Übersicht Stefan König R&D Centre Disability and Critical Illness DAA-Workshop für junge Mathematiker Loccum, 19. und 20. August, 2011

2 Content 0 Introduction 1 International overview 2 Pricing and medical underwriting issues 3 New generation of products 4 Discussion 2

3 SCOR s controlled risk appetite delivers a fully operational Group optimally geared towards current & foreseeable economic and industry environments 2010 Best Global Reinsurance Company A leading global reinsurer 2010 (Re)insurer / Sponsor of the Year 4.4 billion Shareholders equity A multi-cultural Group with 35 offices across 5 continents New York London Paris Cologne Zurich More than shareholders worldwide 29 billion balance sheet Singapore 1.9 billion 2009 Life embedded value 6 Hubs 2010 Casualty Actuarial Society Award Financial strength ratings: A from S&P, positive outlook A2 from Moody s, positive outlook A from Fitch, positive outlook A from AM Best Strong global franchise with approx clients SCOR Global P&C: best reinsurance company team for Motor and Facultative 3

4 SCOR Global Life R&D Centres Expert teams in actuarial science and medicine A cutting-edge expertise for designing products for mature as well as emerging markets From small targeted projects to full turnkey solutions Four International Research & Development Centers dedicated to: Longevity and Mortality Long Term Care Disability and Critical Illness Risk Assessment and Claims Management Close collaboration with a large network of researchers Scientific partnerships are built up with institutions and scientists from several European countries. SCOR Global Life R&D can offer Support in medical risk assessments (rare pathology, HIV, ) Longevity trends Portfolio analysis on level and trend for: Mortality Morbidity (LTC, CI, Disability) Claims duration (LTC, Disability) Risk modeling Transfer and adaptation of our LTC expertise Risk monitoring R e s e a r c h Product Development Communication Risk Mgmt. 4

5 Content 1 International overview 2 Pricing and medical underwriting issues 3 New generation of products 4 Discussion 5

6 Basics What is Critical Illness insurance? CI insurance pays a lump sum benefit if the insured person suffers a serious condition. Dread Disease Trauma (cover) Critical Illness Maladies Graves Maladies Redoutées Schwere Krankheiten (Versicherung) Free Choice! Simple! => Life-threatening 6 6

7 History of Critical Illness Once upon a Time in South Africa 1967 first human to human heart transplant by Christian Barnard Marius Barnard: You need insurance not only because you are going to die, but, because you are going to live first CI insurance sold by Crusader Life covering cancer, heart attack, stroke and coronary artery bypass graft 7 7

8 History of Critical Illness to the rest of the world 1986 UK 1986 Ireland 1987 Australia 1988 North America 1988 Singapore, Taiwan,... since 1990 Eastern Europe since 2000 Korea, China 8 8

9 Market Overview Estimated Gross CI premium (in force) Highest volume NEW: Greater China NEW: Korea Japan (Cancer) High volume MATURE: United Kingdom Southeast Asia USA (Cancer) Significant volume Canada South Africa Australia CI in % of life premium Worldwide: ca. 1% UK: ca. 1% Asia: ca. 3% Legend < > 3.0 (in billion Euro) 9 9

10 How it works how it sells What is Critical Illness insurance (CII) usually? Lump sum benefit (free choice!) Life-threatening conditions Survival period And what it is (usually) not: No annuity benefit No reimbursement No less severe conditions No death benefit 10 10

11 How it works how it sells Why CII? a global overview Best medical treatment Afford specific treatments Avoid hospital waiting lists Foreign country Additional expenses Family members accommodation Home and car adaptations Compensate for loss of income Pay-off loans Disability income Far East Eastern Europe Middle East Canada United Kingdom 11 11

12 How it works how it sells Where is the insurance gap for CII? Statutory Health Insurance Private Health Ins. CII Statutory Disability Insurance Private Disability Insurance 12 12

13 How it works how it sells Simplicity vs. limited cover Core Conditions Life-threatening Cancer Coronary Artery By-Pass Graft Heart Attack Stroke Kidney Failure Major Organ Transplant Simple! Limited! Additional Conditions: Illness type Alzheimer's Disease Muscular dystrophy... Accident type Severe burns Major head trauma... Catch-all type Long-term Disability Long-term Care Terminal Illness 13 13

14 Improving transparency Standardization in mature CI markets Worldwide trend towards standard definitions Increase transparency and comparability Avoid reputation risk Consumer protection Country # of CI (2010) 1 st regulated Singapore s Malaysia UK Israel China South Africa 4x4 grid

15 Improving transparency Example of the United Kingdom Standardization of 23 CI definitions by Association of British Insurers (market average = 34) Review of CI definitions every 3 years Bad press due to high claim declination rates Comprehensive update of Standard of Best Practice in 2006 focusing on wording of product descriptions Guidance paper on claims handling in 2008 Product ratings evaluating quality of coverage 15 15

16 Content 1 International overview 2 Basic pricing and medical issues 3 New generation of products 4 Discussion 16

17 Pricing and medical u/w issues Additional vs. accelerated benefit 200K Death 200K Additional 100K CI + 28d survival 100K Death 200K 200K Death 200K Accelerated 100K CI Death 100K 100K 17 17

18 Pricing and medical u/w issues Core CI conditions determining the price Threatening Sickness Extension Accidental Extension (7%) Long-Term Care (5%) Likely Core Conditions (4%) (84%) Male, 50 yrs 18 18

19 Pricing and medical u/w issues CII is not inexpensive CI cover costs much more than Term Life 6,0 Male, 50 6,0 Female, 50 5,0 5,0 per m ille 4,0 3,0 2,0 1,0 4,0 Insurance Rate per m ille CABG,MOT,Kidney 3,0 Stroke HA 2,0 Cancer 1,0 Insurance Rate CABG,MOT,Kidney Stroke HA Cancer 0,0 Incidence 0,0 Death Acc. CI Incidence Death Acc. CI 19 19

20 Pricing and medical u/w issues Data, data, in experienced markets Claims experience Own date Reinsurer Actuarial organizations Trend extrapolation Also compared to other markets (Legal) regulations Conditions might be specified by government Medical assessment restrictions Common practice -- not always best practice 20 20

21 Pricing and medical u/w issues Data, data, in new (CII) markets Primary raw data National statistics (registries, hospital data, etc.) International statistics (esp. WHO) Regional data / medical studies / surveys Gather and evaluate secondary data Actuarial organizations Industry data Adjustments by additional information Medical underwriting Experience from similar products / similar markets 21 21

22 Pricing and medical u/w issues Standard pricing approach Additional benefit: Accelerated benefit: RR RR Smoker/non smoker tariff add x j i i x (28) 1 q r, j f a j s 1 x, j r, j f a j s 1 n x, j o x, j r ox, j j x j acc x j x, x, j n k q r x Cancer ann.ch. 1, % Crude i_x TargYr_ix Overlap 28 days qx Ins/Pop AdjFact AddBen k(x) Ins q(x) AccBen Cancer ,22 0,24 0,00 0, ,75 1,00 0,18 0,078 0,63 0,13 Cancer ,24 0,26 0,00 0, ,75 1,00 0,19 0,077 0,60 0,15 Cancer ,25 0,28 0,00 0, ,75 1,00 0,21 0,075 0,57 0,16 Cancer ,27 0,30 0,00 0, ,75 1,00 0,22 0,075 0,54 0,18 Cancer ,30 0,32 0,00 0, ,75 1,00 0,24 0,076 0,51 0,20 Cancer ,32 0,34 0,00 0, ,75 1,00 0,26 0,077 0,49 0,22 Part of standard pricing sheet 22

23 Pricing and medical u/w issues Cancer incidences by country 4,5 4,0 3,5 in per mille (%o) 3,0 2,5 2,0 1,5 1,0 0,5 0,0 U. S. A. Germany Poland (WHO) U. K. Poland (2007) World Jordan Cancer incidences by country (ASR, differed sources) 23 23

24 Pricing and medical u/w issues Death Certificate Only (DCO) DCO cases in % of total East German cancer incidences 40% 35% 30% 25% 20% 15% 10% 5% 0% Age band Source: German Cancer Registry 24 24

25 Pricing and medical u/w issues Regional variation specific characteristic by cancer site Breast cancer incidences - female Taiwan Japan Australia Korea Genital cancer incidences - male Taiwan Japan Australia Korea Thyroid cancer incidences - female Taiwan Japan Australia Korea Oral cancer incidences - male

26 Pricing and medical u/w issues Trend risk: Sustainable CI definitions, e.g. Cancer: A malignant tumour characterised by the uncontrolled growth, spread of malignant cells and invasion of tissue. The term cancer includes leukaemia and Hodgkin's disease, but the following tumours are excluded: All tumours that are histologically described as pre-malignant, as non-invasive or as cancer in situ (including CIN-1, CIN-2, CIN-3). Any malignant tumour in the presence of Human Immunodeficiency Virus Any skin cancer other than malignant melanoma starting with Clark Level III Prostate cancer described in TNM classification as T1a or T1b Papillary micro-carcinoma of thyroid or bladder Chronic lymphocytic leukaemia less than Rai stage

27 Pricing and medical u/w issues Trend risk early-stage thyroid cancer High prevalence of papillary thyroid microcarcinoma Increasing detection due to improved scanning Screening becoming standard procedure Thyroid cancer Korea (ASR, per 100'000) Explosion of female incidences (+25% p.a.) male female

28 Pricing and medical u/w issues More declined applications and claims Underwriting Standard Substandard Declined CI 65-70% 15-20% 8-12% Life 75-80% 6-8% 5-7% Claims Assessment Denied CI 20-25% Life 5-10% In 2008 (after ABI Code of Practice): 10% of CI claims declined 3% of term life not paid Christou, 2003, SOA CI Conference 28 28

29 Pricing and medical u/w issues Anti-selection? Asian claims example 120% 100% 80% 60% Loss Ratio in Percent of first year loss ratio by Underwriting Year (UWY) Anti-selection not compensated by selection No first (second/...) year rate reduction 40% 20% 0% 1st year 2nd year 3rd year 4th year UY 2003 UY 2004 UY 2005 UY

30 Pricing and medical u/w issues Tele-Interview Improve costumer experience Personal contact Direct acceptance / Privacy at home Reduction of agent involvement Reduction of anti-selection and non-disclosure Reduction in medical evidence needed In UK 80% of companies are using it for CI 30 30

31 Content 1 International overview 2 Pricing and medical underwriting issues 3 New generation of products 4 Discussion 31

32 Multiple benefits From single lump sum to reinstatements Standard Critical Illness cover: Lump sum benefit => no subsequent cover Objective to guarantee reinstated cover First versions reinstate Life cover for accelerated CI Later introduction of CI reinstatements Buy back option 2 nd event cover, Multiple benefits 32 32

33 Multiple benefits Life Buy back High mortality rates after CI leading to high costs Price depending on survival period (min 1 year) Immediate or gradual build-up of death cover (e.g. 25% over 4 years) In practice not very popular 33 33

34 Multiple benefits 2 nd event cover Reinstatement of CI benefits with up to 100% sum assured Only for CI conditions that are not related to the first claim Defined groups or matrix of covered conditions Benefits to customers Easy to understand / Enhanced benefits Benefits to insurer Simple administration / Easy to sell 34 34

35 Multiple benefits Recovery benefit rider (AVIVA in Singapore) Max. entry age is 65 years Cover duration from 22 to 99 years Accelerated CI; non-guaranteed premium CI Recovery Benefit Rider is attached to the basic policy gives the right of the policyholder to buy a new standalone CI if he made a claim of a CI against the basic policy 35 35

36 Multiple benefits Recovery benefit rider (AVIVA in Singapore) How does it work? This new standalone CI is charged at standard premium at the newly attained age No medical or financial underwriting Term equal to the remaining coverage term of the original policy Sum assured will be capped at 75% of the original policy 36 36

37 Multiple benefits Recovery benefit rider (AVIVA in Singapore) How does it work? This second policy will exclude the same CI claimed against the original policy and as well as all other related CI 1 year waiting period after 1 st CI claim is made 14-day survival period for claiming 2 nd CI is required due to standalone CI Death within survival period: MIN (10% of CI benefit; SGD10,000) will be payable 37 37

38 Multiple CI Grouping approach as applied in Singapore Base products Pay 100% of the sum assured for each eligible critical illness Standalone type with additional small fixed death benefit Cover up to age 85 to 99 Non-guaranteed premium rate 38 38

39 Multiple CI Grouping approach as applied in Singapore / Malaysia Categorization of 5 to 7 groups no correlation between CI incidences of different groups CI claims of up to 3 to 4 times Coverage for 2 to 3 instances of Cancer after 5-yr cancer-free WoP upon diagnosis of 1 st CI 90 day Waiting period Heart Attack / Major cancer / Coronary artery by-pass surgery / Angioplasty PRU multiple crisis cover (Malaysia) 39 39

40 Multiple benefits Grouping approach from Prudential Singapore 40 40

41 Scaled Benefits Better match of benefit and needs The more severe the higher the payment (tiered / staged) Paid sooner No windfall profits Less anti-selection Support prevention and intervention at early stage 41 41

42 Scaled Benefits Serious Illness Cover PruProtect Prudential UK and South African insurer Life, disability and severity based critical illness cover 161 listed conditions market average:

43 Scaled Benefits Serious Illness Cover PruProtect Staged payments; 6 levels: 10% to 100% Remaining payments if conditions worsen Rewards for regularly exercising Sold only by advisors due to high complexity Fully and thoroughly underwritten 43 43

44 Scaled Benefits Serious Illness Cover PruProtect Example of 2 nd payment 1 st Claim Level F: 10% Yes 2 ND CLAIM: Same body system category? No 2 nd Claim Level C: 50% Yes Same disease? No Claim Paid: 50% Unrelated! Progressive and Related! Claim Paid: 40% = 50% - 10% Yes Claim Paid: 40% = 50% - 10% Within 36 month? No Claim Paid: 50% Related! Unrelated! 44 44

45 Scaled Benefits Product example from Singapore Standalone with additional small fixed death benefit 30 conditions with up to 3 levels ( %) Cover up to age 75 Non-guaranteed premium No waiting period required between submissions of claims 45 45

46 Scaled Benefits Product example from Singapore One Time Claim Entitlement for each Severity Level Once a claim is admitted, no future claims under the same of lower Severity Level of the same Critical Illness For example, if Major Cancers at Severity 50 is admitted, no future claims under Major Cancers at Severity 25 and Severity 50 Overlapping case Two or more claims under different Severity Levels of the same CI at the same time, only pay the highest claim 46 46

47 Scaled Benefits Product example from Singapore Critical Illness claims for the same illnesses 47 47

48 Scaled Benefits Challenges Complexity No standardized definitions Product design/ claims assessment: define meaningful benchmarks for severity levels Korean experience with FSS Pricing: Few statistics Risk monitoring: IT systems keeping track of claims history!? Agents selling the 100% level: reputation 48 48

49 Content 1 International overview 2 Pricing and medical underwriting issues 3 New generation of products 4 Discussion 49

50 R&D Centre Disability, Critical Illness Thank you for your kind attention! Contacts Dr Christian Cypris Stefan König Karsten de Braaf Dr Ibrahim Ly ( ) Head of R&D Centre Product Actuary Product Actuary Product Actuary Phone: Phone: Phone: Phone: Mobile:

51 Critical Illness Versicherung - eine internationale Übersicht Stefan König R&D Centre Disability and Critical Illness DAA-Workshop für junge Mathematiker Loccum, 19. und 20. August, 2011