What can you find in Health Insurance. Basic actuarial models?

Transcription

1 p. 1/25 What can you find in Health Insurance. Basic actuarial models? Ermanno Pitacco University of Trieste, Italy Health Insurance Day AG Insurance Brussels - November 19, /25

2 p. 2/25 Agenda What is Health Insurance? Health-related risks and risk transfer Describing the products Stand-alone products vs packages Other topics Actuarial models: life vs non-life techniques Concluding remarks 2/25

3 p. 3/25 WHAT IS HEALTH INSURANCE? Look at the terminology adopted in the practice You find, for example: accident and sickness the cause is referred to disability the physical effect is referred to loss-of-income the financial effect is referred to income protection the purpose (of the policy) is referred to Really a babel situation! Hence, a primary concern: to define an area in which we can place all the products which provide benefit related to individual health conditions 3/25

4 p. 4/25 What is Health Insurance? (cont d) (My) definition: In a broad sense, the expression health denotes a large set of products which provide benefits in the case of need arising from either accident or illness, and leading to loss of income (partial or total, permanent or non-permanent), and/or expenses (hospitalization, medical and surgery expenses, nursery, rehabilitation, etc.). Health, in its turn, belongs to the area of s of the person... 4/25

5 p. 5/25 What is Health Insurance? (cont d) Insurances of the person Life Life annuities Health Other s of the person Pure endowment Endowment Whole-life Term Sickness Accident Income Protection Critical Illness ins. LTC Insurances of the person: a classification 5/25

6 p. 6/25 HEALTH-RELATED RISKS AND RISK TRANSFER Definition of health provided at the beginning of Chapter 3 (devoted to the description of health products and health care arrangements) Chapter 1 devoted to health-related risks and the consequent need for health Two important questions: do all the health-related costs really constitute risks? is health (private and/or public) needed to cover all the health-related costs? What are the alternatives and the relevant features? 6/25

7 p. 7/25 Health-related risks and risk transfer (cont d) Pre-funding Pooling 1 Out-of-pocket No No 2 Savings Yes No 3.1 one-year No Yes 3 Insurance 3.2 multi-year natural premiums No Yes level premiums Yes Yes Financing health-related costs 7/25

8 p. 8/25 Health-related risks and risk transfer (cont d) Health-related event Probability Cost Appropriate financing strategy High Low Out-of-pocket Medium Medium Savings Low High Insurance Strategies for financing health-related costs 8/25

9 p. 9/25 Health-related risks and risk transfer (cont d) Main object of Chapter 2: the risk transfer process operated by an company diversification via risk pooling transformation of pure individual risks into a speculative risk, i.e. the portfolio random result Focus on non-diversifiable risks, and in particular: the (aggregate) longevity risks, and its impact on lifelong covers Risk management issues the risk-management process and its steps (the product design included) 9/25

10 p. 10/25 DESCRIBING THE INSURANCE PRODUCTS Chapter 3: first, the following products are described Accident Sickness Disability Long-term care Critical illness Other limited-coverage products Focus on type of benefits, in terms of amount definition (see following Figure) 10/25

11 p. 11/25 Describing the products (cont d) Benefit amount Predefined Expense-related Fixed Degree-related Annuity-like benefits Constant Fixed-rate escalating Inflation linked Multi-year covers Defining the benefit amount: a classification 11/25

12 p. 12/25 Describing the products (cont d) Special emphasis on Long-term care (LTCI) products Long-term care (LTCI) products deserve special attention LTCI provides benefits of remarkable interest in the current demographic and social scenario LTCI covers are difficult products In particular: in many countries, shares of elderly population are rapidly growing because of increasing life expectancy and low fertility rates household size progressively reducing lack of assistance and care services provided to old members of the family inside the family itself LTCI products are rather recent senescent disability data are scanty pricing difficulties arise high premiums (in particular, because of a significant safety loading) obstacle to the diffusion of these products (especially stand-alone LTC covers only providing protection ) 12/25

13 p. 13/25 STAND-ALONE PRODUCTS VS INSURANCE PACKAGES Still in Chapter 3: packaging covers Combined products in the area of health : Insurer s perspective a combined product can result profitable even if one of its components is not profitable a combined product can be less risky than one of its components (less exposed to impact of uncertainty risk related to the choice of technical bases) Client s perspective purchasing a combined product can be less expensive than purchasing all the single components (reduction of acquisition costs charged to the policyholder) Interesting examples provided by LTCI Combined LTCI products: mainly aiming at reducing the relative weight of the risk component by introducing a saving component, or by adding the LTC benefits to an product with an important saving component 13/25

14 p. 14/25 Stand-alone products vs packages (cont d) LTC Insurance predefined benefits Immediate care plans ("point-of-need" plans) Pre-funded plans Care annuities Combined products Stand alone LTC + lifetimerelated benefits Life care pensions LTC rider to a whole-life assurance IP + LTC Enhanced pension LTCI products with predefined benefits: a classification 14/25

15 p. 15/25 Stand-alone products vs packages (cont d) Insurances of the person Life Life annuities Health Other s of the person Pure endowment Sickness Endowment 5 Accident Income Protection 6 Whole-life Critical Illness ins. 4 Term 3 LTC 2 1 Packaging health covers with lifetime-related benefits 15/25

16 p. 16/25 OTHER TOPICS Still in Chapter 3: Group in the health area health group plans in the framework of employee benefit plans Public and private health possible interactions between public and private health mixed systems of health care funding Micro in the health area arrangements based on health micro schemes, i.e. institutions which provides covers to individuals arrangements relying on a mutual organization 16/25

17 p. 17/25 ACTUARIAL MODELS: LIFE VS NON-LIFE TECHNIQUES Chapter 4 and Chapter 5: the actuarial chapters Focus on two basic products sickness expense-reimbursement fixed daily benefit disability annuities income protection In particular: probabilistic models technical bases actuarial values premiums reserves Mix of non-life and life actuarial techniques 17/25

18 Actuarial models: life vs non-life techniques (cont d) Non-life features: claim frequency, claim severity, ascertainment and assessment of claims, etc. Life features: life tables, interest rates, indexing, etc. FIXED-AMOUNT TYPE OF BENEFIT EXPENSE-RELATED & DEGREE-RELATED POLICY TERM & PREMIUM ARRANGEMENT MULTI- YEAR NATURAL PREMIUMS random frequencies random durations random frequencies random amounts random durations ONE-YEAR mathematical reserves LEVEL PREMIUMS Life and non-life actuarial features in Health Insurance 18/25 p. 18/25

19 p. 19/25 CONCLUDING REMARKS Some acknowledgements This book originates from various personale experience teaching (university courses, seminars, summer-schools, etc.) contacts with companies CPD initiatives my presence in the Health Section of the IAA Thanks to for providing financial support Mathematics... Do you like heavy mathematics? For example... 19/25

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22 p. 22/25 Concluding remarks (cont d) Sorry, you do not find such a mathematics in the new book but if you really need it, you can refer to... 22/25

23 p. 23/25... something old : 23/25

24 p. 24/25 otherwise, something new: 24/25

25 p. 25/25 Many thanks for your kind attention! 25/25