Disability Income Product Innovation in Australia

Transcription

1 Disability Income Product Innovation in Australia James Louw Chief Actuary, Gen Re, Australia Session Number: WBR5 Joint IACA, IAAHS and PBSS Colloquium in Hong Kong

2 What we ll cover Individual DI products in Australia A little about Australia & our local DI Market Product Innovations The Drivers of Change Gen Re:

3 Individual Life market growth 6000 API in $1000s Lump Sum Disability Income Gen Re:

4 Typical Disability Benefit in 1969 Total Disability Gen Re:

5 Typical Disability Benefit in 1989 Total Disability Partial Recovery Waiver of Premium Recurring Claim Increasing Claim Inflation Increase Specific Injury Rehabilition Total Permanent Disability Gen Re:

6 Typical Disability Benefit in 2012 Total Disability Partial Recovery Waiver of Premium Recurring Claim Increasing Claim Inflation Increase Specific Injury Rehabilition TPD Death Cosmetic/Elective Surgery Special Care Family Support Worldwide Cover Reward Cover Occupational HIV Day 1 or 4 Accident Booster Benefit Bed Confinement Crisis Recovery Housekeeper Overseas Assist Accommodation Involuntary Unemployment Return to Work Premium & Cover Suspension Pause Cover Continuation Guaranteed Insurability Reduce Waiting Period Extended WOP Child Care Assistance Transport Cover Retraining Benefit Cover Suspension Meal Allowance Gen Re:

7 The Australian Workforce Australian Population: Aprox. 23 million Australian Workforce Aprox.11 million 55% Male Average Annual Earnings (before Income Tax) Aprox. A$60,000pa (US$ = Aus$) Males get paid a 15% more than Females on average Unemployment Rate 5.3% 1/2012 (was 3.6% in 1/2008) Inflation Rate 1.6% Q Gen Re:

8 The Australian Individual DI Market No. of Major Disability Risk Companies - 12 Size of Individual Disability Market 2012: New Sales, A$463m API with 18% growth last year In force, A$1892m API with 11% growth last year IFA (Independent Financial Adviser) market Almost no agents linked to specific Insurers Most Disability sales are made in conjunction with Life, CI & TPD Sales Gen Re:

9 By Benefit Period Mix Of Business About 70% To age 65, 12% each for 2yrs & 5 yrs By Waiting Period About 70% 30 day, 5% 14 day, 15% 90 days By Occupational Class About 40% Professional, 20% Clerical, 20% Skilled Manual, 10% Unskilled/Heavy Manual Gen Re:

10 Distribution by sum assured $ $ $ $ $ $ $ % 5% 10% 15% 20% 25% 30% 35% Gen Re:

11 Claim Incidence by Sex Males (Number and % Total n=5816) Musculo Mental Neoplasm Circulatory Infection Digestive Nervous Other For males, musculoskeletal and accident claims are most common Females (Number and % Total n=943) Accidents Mental disorders are most common sickness claim in females Mental Neoplasm Genitourinary Circulatory Infection Digestive Nervous Other Gen Re: 2012 Musculo Accidents 11

12 Claim Incidence by Occupation Mental Musculo White-collar Males Neoplasm Circulatory Accidents Infection Digestive Nervous Other Musculo In white-collar males, mental claims are as common as musculoskeletal claims Blue-collar Males Mental Neoplasm In blue-collar males, musculoskeletal and accident claims are most common Accidents Gen Re: 2012 Circulatory Infection Digestive Nervous Other 12

13 Length of claim Mental 500 Circulatory Neoplasm 200 Musculo Male Whitecollar Male Bluecollar Female White-collar Accident All Sickness Gen Re:

14 Today s Contracts Guaranteed Renewable Coverage Product Categories - Premium, Standard, Basic & Special Risk 75% of Income Plus 10% Superannuation Contributions Plus top-up to $60,000 per month for 2 year benefit period At lower replacement ratios (50% and 20%) Benefit Periods: 1-5yrs, To age 50, 55, 60, 65 & 70 Waiting Periods: 14, 30, 60, 90, 180, 365, 730 days Additional Benefits 35 or more Gen Re:

15 Core Product Features Agreed Value (AV) Benefit applied for plus indexation will be honoured at time of claim (AV) Indemnity Value (IV) Based on the insured s net income 12 months prior to disablement, or Best 12 month period in the 3 years prior to disablement Tax Implications Benefits are taxable and premiums are tax deductible Gen Re:

16 Core Product Features Benefit Offsets Paid sick leave entitlements Compulsory statutory insurance schemes Other disability, group, sickness or accident insurance cover, including mortgage cover Benefit Exclusions War or an act or war (this is being removed on many contracts) Intentional self inflicted act Voluntary participation in a criminal act Pregnancy (except if the disablement continues 3 months beyond confinement) Gen Re:

17 Core Product Features Total Disability (Severely Disabled) occurs if you are unable to: Work in your own occupation, has become Work more than 10 hours, OR Perform 1 important duty, OR Generate at least 80% of pre-disability income Partial Recovery/Disability Deemed capability clause Gen Re:

18 Benefits Assisting RTW Partial/Recovery Disability Unlimited timeframe Rehabilitation Expense Reimbursement Up to 6 times the monthly benefit Overseas Assist Benefit Reasonable repatriation expenses up to $10,000 Retraining Benefit Pays up to 12x MB for retraining expenses Return to Work Benefit If paid the Retraining Benefit, 1x MB after 3 months of full-time work And 2x MB after 6 months of full-time work Gen Re:

19 Benefits Adding Additional Support Family Support Benefit If the insured is confined to bed for at least 30 consecutive days Immediate family member ceases employment or registered nurse is employed to care for patient Maximum of 3 monthly payments ($3,000 per month) Housekeeper Benefit If the insured is confined to bed for at least 30 consecutive days Maximum of 6 months ($3,000 per month) Family Accommodation Benefit Pay of costs up to $100/day for up to 90 days if 100 kms away Gen Re:

20 Benefits Adding Additional Support Special Care Benefit If confined to bed at home & a totally dependent on a nurse or PCA Pay additional lesser of $5000/m or monthly benefit for up to 6 months Meal Allowance Benefit If confined to bed, an additional $500/m for a meal delivery service Child Care Assistance Benefit Reimburses lesser of 5% of MB or $400 for child care costs Commuter Benefit During the WP, if you try to RTW, reimburses lesser of 1/3 of MB or $500 Gen Re:

21 Benefits Increasing Risk Inflation Increase Benefit (prior to claim) Generally the greater of 3% or the indexation factor Increasing Claim Option Generally the lower of 10% and indexation factor Booster Option If totally or partially disabled the insurer will pay an additional 1/3 rd of the monthly benefit Day 1 or 4 Accident Benefit Payments commence immediately or after 3 days, for 14 days or the waiting period has expired Gen Re:

22 Benefits Increasing Risk Cosmetic/Elective Surgery Benefit Total Disability paid if cover in force for at least 6 months Guaranteed Insurability Prior to age 55, up to 20% increase every 3 yrs, in addition to CPI Not while on claim Not exceeding 75% of monthly income Superannuation Guarantee Additional amount over the 75% Replacement Ratio Cover Continuation Reach age 65, you can extend your cover age 75 Gen Re:

23 Lump Sum Benefits Specific Injury Benefit Not required to be totally or partially disabled Guaranteed payment of monthly benefit for specific events; loss of use of both hands or feet or sight in both eyes Fractures to; pelvis, leg, collarbone, etc Death Benefit Up to 3 months benefit Crisis/Trauma Recovery Benefit Pays for Critical Illness type events MI, Ca, Stroke, CABG, etc Lump sum payment up to 6 times monthly benefit Do not need to be disabled from performing employment tasks Gen Re:

24 Lump Sum Benefits Occupationally Acquired HIV, Hep. B & Hep. C Lump Sum payment, only paid once Up to A$500,000 Reward Cover If you keep your policy for 3yrs, bonus of up to $100,000 ADB free No Claim Bonus Reach the Expiry Age without making a claim, refund of up to 20% premiums paid Total & Permanent Disability Lump sum payable if TD & permanently TD Usually after the expiry of a 2yr, 3yr or 5 yr BP Gen Re:

25 Other Additional Product Innovations Recurring Disability Claim Up to 12 months Premium Waiver Benefit Waive premium whilst on claim Cover Suspension Benefit Cover will be suspended up to 12 months Reinstated without underwriting Bed Confinement/Nursing Care Benefit Pay during Waiting Period up to 90 days Gen Re:

26 Other Additional Product Innovations Worldwide Cover 24 hour a day in any country No terrorism exclusion clause Involuntary Unemployment Up to 3 months benefit to payment minimum loan repayments Reduce Waiting Period If you have Superannuation DI (2yr BP) & you buy 730day WP DI And your change employers, you can automatically reduce your WP Transport Benefit Reimburses the cost of emergency transport (not ambulance) within Australia Gen Re:

27 Benefits Ceased over 40yrs Full Guaranteed Coverage Lifetime Benefit Periods Gen Re:

28 Other distribution Superannuation Massive driver of sales Banks Not much focus on DI Online Lump sum benefits seen as easier to underwrite Direct TV High level of competition Sold as bill payer and not as income replacement Guaranteed issue Low sum assured and short benefit periods Gen Re:

29 Drivers of Product Change in Australia Highly competitive market Mainly focused on attracting distribution Regulation FOFA Risk Product Research Houses Profitability Some benefit simplification is occurring Many paid options sold very low volumes Gen Re:

30 Where is the DI Market going Disability Product Innovation over 40yrs Has it been good for the consumer? Awareness of benefits Understanding of what they have Australia s Disability Marketplace Took on additional risk Profitability poor, but is it cyclical Competition with Superannuation Claims management resources Gen Re:

31 Disclaimer This presentation is protected by copyright. All the information contained in it has been very carefully researched and compiled to the best of our knowledge. Nevertheless, no responsibility is accepted for its accuracy, completeness or currency. In particular, this information does not constitute legal advice and cannot serve as a substitute for such advice. It may not be duplicated or forwarded without the prior consent of the Gen Re. Gen Re: