Assurance Dépendance

Transcription

1 Assurance Dépendance

2 Long-Term Care Insurance 1 Introduction 2 Caractéristiques des produits 3 The CIRDAD 4 Technical Issues 5 Underwriting selection and claims management 2

3 What is LTC (Loss of Autonomy)? The concept of Loss of Autonomy (LTC) can be defined based on 3 different notions : Functional limitations: caused by impairment in functional functions (walking for instance), in sensory development or in cognitive disorders; Restrictions in activity: measured by ADL or IADL Need of help or assistance One definition of the Loss of Autonomy: Illness or ageing may generate functional limitations which, if not compensated by technical aids or environment management, could lead to activity restrictions. This will lead to a regular assistance of a third person for the basic activities LTC is neither Disability Insurance nor Health Insurance even if it is triggered by the same causes Disability is a reduction of capacity to accomplish an activity normally (World Health Organization definition) LTC is a limitation in the accomplishment of a normal role for age resulting from an impairment or disability LTC is defined by the inability to perform the Activities of Daily Living: Bathing Dressing Continence Eating Walking Bed-chair transfer Other scales often public schemes - also use Instrumental Activities of Daily Living (more complex : domestic activities, managing of the financial affairs, phoning ) or Superior Activities (interaction with social background: leisure, sport, clubs, travels, ) Determining factors are numerous and various: The ageing of the population in the developed countries Actual or perceived role of the family assistance Actual or perceived role of the public schemes 3

4 The ageing of the population in developed countries An inevitable ageing of population: an increasing ratio of over 65 years old Percentage of people over 65 in the population 30% 25% 20% 15% Italy Spain Germany France USA 10% Source : EUROSTAT, DREES-OFCE and U.S. Bureau of the Census, current Population Reports 4

5 Introduction Demography in France Main figures In 2005, 1 in 5 is over 60 In 2050, 1 in 3 will be over 60 Actual or perceived role of the family support Only 40% of French dependent people are assisted by their family The number of people over 60 will double And The Spanish and the Japanese cases are far from this situation with more than 70-65% assisted by family. The number of people over 75 will be tripled The number of people over 85 will be multiplied by 4 The number of natural home helps (spouse, children, neighborhood) will drop in France from 2,5 to 2,1 persons by 2040 as: The average size of the family is decreasing The age of fertility is increasing, reducing the age and the availability of the children at moment of LTC occurrence The labor participation of young and middle-aged women is rising 5 5

6 Introduction The role of the public schemes is fundamental for the development of private insurance : Communication around the new public scheme, APA, in France strongly boosted a sleepy LTCI market in 2002 LTC: a common problem for developed countries: Life Expectancy of elderly people has increased Healthy Life Expectancy without severe disability Life Expectancy with severe disability nevertheless, a very generous plan can reduce the place of the private market (Germany, Japan) One of the biggest threats to the wealth of the elderly Only 15% of people think they can cover the costs of LTC Current governmental reflections about the new branch of Social Security for LTC and the Alzheimer plan should be the main LTC growth s driver Long-Term Care funding Shortfall of State benefits: large need of cover to face long-term care related costs Strong opportunities for development of private Insurance 6 6

7 The LTC framework in France The average cost of LTC per person: EUR 2,500 to 3,000 per month The average pension, which is about EUR 1,200 per month Public scheme APA: EUR 491 monthly average APA Gap to be financed: average EUR 1,500 per month 7

8 Long-Term Care Insurance 1 Introduction 2 Caractéristiques des produits 3 The CIRDAD 4 Technical Issues 5 Underwriting selection and claims management 8

9 The French v.s. US market There are 2 main product designs : the reimbursement design and the cash benefit design USA FRANCE Public scheme Medicaid / Medicare PSD then APA Experience ~ 30 years ~ 25 years Annual Market Growth <0 p.a. on % p.a. until 2006, stand still after Current Market size Products / Benefits More than 7 million insured in-force Mostly reimbursement (of care services) More than 6 million insured in-force Cash benefits The US approach: Currently mainly reimbursement, aiming at covering all the costs Thus complex products to design, expensive and difficult to monitor and administer In practice: low flexibility / inception options, limited durations, inflation issue, lapses issue, technical rate issue, price increases LTCI Market: adjusting for many years (still ongoing) The French approach: Coverage of severe impairments, now extending to less severe ones Simple to sell and administer - monitorable (large consistent experience) In practice: flexibility due to cash benefit, but generally does not cover the full cost of LTC and does not fit into the actual need of services LTCI Market: needs a real new life (some products launched) SGL operates only in cash benefit design 9

10 Group vs Individual Insurance Individual product Group: compulsory application Application Optional Compulsory Benefit level Choice between several guarantees with recommended limits Same benefits for each member Entry age Usually between 40 y.o. and 75 y.o. Implicit limits Deferred period Usually 90 days, absolute or relative Usually 90 days, absolute or relative Medical underwritting Systematic No, if sufficiently large group Elimination period Depends on the country but usually 3, 1 or 0 years No, if sufficiently large group Duration of the cover Usually lifetime Annual Premiums Level premium (based on the entry age) Risk premiums Reviewable premiums Usually yes Yes Paid-up value Depends on the country No Surrender value No No Reserving Police termination Premium reserve: reserve for increasing risk Reserve for annuities in payment Annuities in payment are still paid Paid-up value for the other insured Reserve for annuities in payment Only annuities in payment are still paid 10

11 Level premium and risk premium Whole life level premium Depends on the age at inception To be paid until claim payment or death Revisable rate (according to the technical results, medical treatment improvements and extended lifespan) Mainly for individual coverage or group enterprise coverage with a complementary individual cover Risk premium Annual coverage Depends of the age. Could be mutualized, but as long as there s enough young insured to balance portfolio ageing. Independent of time spend in the contract Mainly for statutory coverage of French Mutual or some group enterprise coverage 11

12 Example of pricing (French market) Annual premiums (net of any loadings) 3 months deferred period Elimination period: 3, 1 or 0 years 1000 per month Total Loss of Autonomy Levelled Premium Risk Premium 55yo yo yo ,00 Comparison Risk and level premiums 2 000, ,00 Pure RP Pure LP 60 yo Pure LP 70 yo 1 000,00 Pure LP 75 yo Pure LP 80 yo Pure LP 85 yo 500,00-12

13 Riders and services Riders: «Equipment» Lump sum «Help for the caregiver» Lump sum (Group coverage) «Rest for the caregiver» Lump sum (Individual coverage) «Fracture» Lump sum «Death of the caregiver» Lump sum Services through Assistance contracts, for instance: At inception date: info and advices on everyday life (meal delivery, domestic help ), «life» check up», support in case of LoA of a relative (help for administrative process, search for long-term care facility, search for psychological help ), prevention check up (Home adaptation ), memory check up In case of partial LoAI: home adaptation, medicine delivery, teleassistance (to be connected with the outside world), support for memory. In case of total LoAI: support for life organization and quality of life, support for moving Creation of a complete website on LTC 13

14 Long-Term Care Insurance 1 Introduction 2 Caractéristiques des produits 3 The CIRDAD 4 Technical Issues 5 Underwriting selection and claims management 14

15 CIRDAD A dedicated R&D Center for LTC LTCI Portfolios (an important database) Experience CIRDAD Research Pricing basis / Risk Monitoring New products 15

16 CIRDAD: Statistical data What do we need to know to estimate the price of LTC? How long do people live? How many will need LTC insurance? How long will the period of LTC last? Estimation of transition probabilities Large portfolios of homogeneous insurance data (25 years experience) Aggregate reliable data Combined experience of more than 30 million exposure-years and around claims Population data, Specific studies and surveys Partnership with PAQUID (INSERM) LTC Risk Analysis for elderly: Survey of the French National Institute of Health and Medical Research (INSERM) Epidemiological study dedicated to ageing and its related pathologies A cohort survey, 20 years of follow-up PAQUID s Relevance for Insurance Long-Term Care Risk Definitions Data, Prevalence of severe and moderate disability for very old people 16

17 Long-Term Care Insurance 1 Introduction 2 Caractéristiques des produits 3 The CIRDAD 4 Technical Issues 5 Underwriting selection and claims management 17

18 Technical issues Statistical data 3 transition probabilities Longevity of active people Depends on age, sex, life expectancy without severe disability Incidence of dependence Depends on age, sex, the medical selection effect Longevity of dependent people Depends on age, sex, time aalready spent in LTC, the main disease responsible for dependence 18

19 Technical issues Semi-Markov Model used by Scor Global Life aa P x Healthy aa q x Dead ia p x 0 i x i q x, t i P x Loss of autonomy 19

20 Technical issues Pricing Single pure premium for 1 unit of annuity in the event of total dependence (without taking waiting time into account) S x k0 v k. k p aa, S x. i S x k. a i m, S xk x entry age S sex The risk is differentiated by sex but the premiums are the same for both sexes (M/F proportions) Effect of selection, waiting periods, return of premium taken into account in the rate 20

21 Technical issues Reserving Reserve for active people Prospective method, using pricing basis Unisex General formula : j0 Reserves for outstanding claims j aa i( m) x k. ixk j. axk j. R.(1 r) ( 1 g).p" k PRCx v. j p.ä x entry R annual r annuity g loading P" gross age, premium Depends on age at the beginning of LTC, sex and time already spent in LTC annuity payment for k contribution expenses expenses and aa( m') xk duration return on investment General formula : t PSAP S x m, S. R. r i x a 1 t x dependency age, S sex r annuity payment t dependency exp enses duration 21

22 Technical issues Reserving Equalization fund Reserve intended to smooth the bottom line over time Supplied by a percentage of the profits In order to offset potential future losses Permit to postpone/avoid a repricing After the fund reaches a certain level, the profits of the following years are totally shared Not deductible from the profits (depends on the country) 22

23 Technical issues Statistical analysis Regular statistical analysis Analysis by underwriting generation Impact of selection and elimination period: masking effect Monitoring Differences between pricing assumptions and experience Monitoring incidence and longevity (dependent and independent people) Adapting actuarial basis to the underwriting and acceptance of the insurer 23

24 Statistical approach vs accounting approach Scénario: - Shock on incidence rates : -10% - No shock on autonomous mortality rates - Shock on mortality rates for LTC people : -6% Pricing is at the good level (almost the same than if there was no shock) On the surface, the results are in surplus during more than 20 years. In reality, staying with the initial actuarial basis gives this wrong image of current results. 24

25 6. Sensitivities Sensitivities on level premiums (last SGL s biometric laws and deffered period of 3 months) Total LTC Total and Partial LTC Entry age 55 y.o. 65 y.o. 55 y.o. 65 y.o. Annuity 1200 /y Lump Sum 1000 Annuity 1200 /y Lump Sum 1000 Annuity 1200 /y Lump Sum 1000 Annuity 1200 /y Lump Sum 1000 Incidence +10% +7% +6% +7% +6% 7% +5% +7% +6% Incidence -10% -8% -6% -8% -6% -8% -6% -8% -6% Mortality of autonomous Mortality of Claimants -10% +4% +5% +3% +5% +3% +5% +2% +4% -10% +13% +1% +13% 1% +11% +1% +11% +1% To offset simultaneous decrease by 10% in mortality of autonomous insured and of dependant insured, the incidence should decrease by: 18% for the annuity in case of Total LTC 11% for the lump sum in case of Total LTC 16% for the annuity in case of Total and Partial LTC 10% for the lump sum in case of Total and Partial LTC 25

26 Reinsurance Offer Classical Quota-share treaty per generation: min retention: 20% ideally: 50% Commercial premium + reinsurance commission We help the ceding company concerning: The construction of the product The medical underwriting (process, analysis, ) The piloting of the portfolio following (pricing, reserves, ) The claims follow-up 26

27 Long-Term Care Insurance 1 Introduction 2 Caractéristiques des produits 3 The CIRDAD 4 Technical Issues 5 Underwriting selection and claims management 27

28 Underwriting selection: 2 stages Stage 1: Medical questionnaire filled in by the proposer Simple, rapid and easily completed Detection of preexisting disability or long term treatment a key monitoring tool If the proposer answers «NO» to all questions: acceptance at standard conditions Selection can stop here: about 55% of proposals are insured at standard rates and the others are refused But possibility to study Substandard Risks with assessment of aggravating pathologies Stage 2: Specific Medical Questionnaire completed by the doctor More detailed, with specific questions Family history Lifestyle Existing pathologies and risk factors 28

29 Underwriting selection: The selection by SCOR Global Life Standard risk: Medical Questionnaire without anomalies Substandard Risk: assessment of extrapremium Long Term Care Postponement: pathologies in evolution or not consolidated Refusal: already dependent or foreseeable long term care in a near future 29

30 Underwriting selection: The selection by SCOR Global Life Medical Risk Underwriting Manual: LTC substandard risk: more than 15 years of experience Solem: Computerization of Long Term Care Underwriting Manual An original method A rapid solution obtained by the user Evolution and regular updating of underwriting bases according to our experience An additional protection: the elimination period Accident risk: 0 Illness risk: 1 year Dementia risk: 3 years A safeguard against adverse selection 30

31 Claims management Verification of medical and administrative criteria Administrative: date of the beginning of the long term care elimination period and deferred period Medical: Total or partial dependency must be permanent and irreversible Incapacity to perform 3 of 4 ADL (depending on the definition of the trigger in the contract) Confirmed dementia (MMSE or Folstein s test) Need of a helper 31

32 Thanks for your attention