How To Buy Health Insurance

Transcription

1 Post Retirement Health Insurance KC Cheung, FSA Regional Product Actuary Swiss Re, Life & Health Session Number: MBR10

2 Post-Retirement Health My Challenges What is post retirement healthcare? Post retirement healthcare is nothing new Post retirement healthcare seems crazy to me Let s develop a post retirement healthcare product next quarter My customers are quite young and they don t need this now

3 What is Post-Retirement Healthcare? Big topic in Medical System, "Not so big" in Insurance >50% of hospitalization in Hong Kong What % of "Post-Retirement Health" products in your portfolio?

4 What is Post-Retirement Healthcare? It is not new but it becomes urgent +200% +80% +80% Aging population in the developed world Continuous improvement of average global standard of living 100% 80% 60% 40% 20% 0% Asia Europe North America Source: Swiss Re, Economic Research and Consulting 0-14 (%) (%) 65 or over (%) Humanity's fundamental desire to prolong life will ensure this phenomenon will be hard to stop

5 Risk of Living Longer - Underestimating life expectancy How well are we Prepared for Retirement? Ooops! Not an issue! Source: Swiss Re Survey of Risk Appetite and Insurance: Asia-Pacific 2011

6 The Other Way to Look at This (Insurance) Cost is Increasing Tremendously Life Post Expectancy -65 Life Difference China Expectancy Years Hong China Kong % Years Singapore Hong Kong % Years Malaysia Singapore % Years Indonesia Malaysia % Years Australia Indonesia < Years USA Australia % Years Switzerland USA % Years Switzerland % Source: UN World Population Prospects: The 2010 Revision

7 Some of us are "spoiled" by Corporate Coverage Customer Need to Extend Coverage How well are they prepared for post retirement healthcare? Source: Thematic Household Survey 2008

8 Worried about medical expenses? Yes Insert chart on report p. 27 with data labels Source: Swiss Re "Would You Risk It" Report 2011 Source: Swiss Re Asia Risk Survey

9 Medical Inflation It becomes a moving target Reduction of Government Subsidy Improvement in Diagnosis Living Longer Demand >> Supply Improvement in Treatment Pollutions, Global Warming Improvement in Living Quality General Inflation Greedy Doctors & Hospitals Technology Advancement

10 Example on how medical advancement affects the world Screening Technology Effect US Prostate Cancer incidence % Rate per mille Prevalence of PSA testing 35% % % Incidence 20% % % 5% 0.0 0% Prevalence of PSA testing at ages 65-84

11 Most healthcare reform happening in Asia shifts burden to consumers China 2013 Government has committed to spend USD125bn on broad healthcare provision for citizens with aim of ~90% coverage by 2013 (focus on rural areas) Social Insurance Law (1/7/2011) grants all citizens the right to pension, healthcare, work injury, unemployment and maternity insurance Citizens will be allowed to pay contributions in one place and draw benefits in another Hong Kong 2014 Proposed Voluntary Health Protection Scheme (HPS) Government subsidy to encourage higher take-up of private medical insurance Insurers to offer subsidized private medical insurance with minimum required but can offer top-up cover too Proposed HKD50bn (USD6.4bn) to achieve HC reform objectives Malaysia 2015 Proposed Social Health Insurance ("1Care") to provide health universal coverage Mandatory contributions to government Autonomous Malaysian Healthcare Delivery System to form an integrated publicprivate provider service Government thought to consider an Employee Insurance Scheme; (i) tax relief for medical insurance (ii) provision of minimum CI and hospital benefits Source: AXCO Reports, EIU, Presentation on Malaysia proposed HC Reform from MOH, HK Government Healthcare Consultation Paper

12 Asia is Aging Healthcare Needs are not being met The young workforce population of the 70's and 80's are growing old Aging Longevity Greater life expectancy is extending retirement planning horizon Post-retirement Health Governments are increasingly shifting the burden of care to its citizen Governments Wealth Growing middle class are demanding greater access to healthcare

13 Implication to Insurers From SILVER to GOLD

14 Getting serious illness and inability to pay medical expenses are two biggest drivers for insurance purchases Main worries/concerns for the future that might lead you to consider buying life/health insurance (in %) Source: Swiss Re Asia Risk Survey Joint IACA, IAAHS and 4 PBSS Colloquium in Hong Kong

15 Market Scan Our Product Offers (partially) met Customer Needs Retirement Planning Products means: What is Your Number? Savings Pot Relatively small No Guidance on how to spend it Long Term / Whole Life Coverage Level benefit Inflation greatly erodes value of benefit I am covered by corporate plan. Should I over-insure now? Long Term / Whole Life Coverage "Level" Premium What if premium increase is more than I can afford after retirement?

16 Annuity options? Or Savings plans? Annuity products might not be the priority investment option in the market as the investment return is relatively less attractive to customers compared to alternative savings plans or investment tools. Customers' concerns: Younger generation Annuity options take longer period of time to breakeven the principal invested Elders It's too late for them to buy annuities as they could not fully benefit from the payouts.

17 Products for Aging Risk? I am living longer than I expected!!? I couldn't afford insurance when I was young, can I get some now?? I am living longer than I expected do I have enough savings? Guaranteed Issue Whole Life / Funeral Plans Multiple Pay Medical or Health Coverage Up-selling Existing Policyholders with GI / SI Limited Pay Whole Life / Long Term Rate Guarantee Annuity, lump sum or regular payment

18 Market Scan Which of them are Top Sellers? Hong Kong I'm Well Guaranteed medical insurance into retirement Hospitalization and surgical Guaranteed coverage to age 100 Eligibility before age 70 Long Term Care Continuing Income Benefit LTC Income on disability Eligibility before age 65 Early Income Annuity Plan Annuity to age 99 or 20 yrs Accumulation period, e.g. premium for 3 years / or SP Non-guaranteed element as bonus Singapore Pru Parent Hospitalization and LTC for those looking to support their parents (until age 85) LTC in monthly benefits State sponsored Eldershield Compulsory LTC for citizens and PRs Premiums paid from social security Medisave account Monthly income on disability Malaysia PRU Senior Med Term life policy with medical benefits Hospitalization until age 80 Eligibility from age Mediguard Senior Medical insurance Hospitalization benefits Eligibility from age Guaranteed renewal up to 75, age 80 discretionary Guaranteed immediate annuity Lifetime annuity for those aged Annuity based on yield on SP from 5-7% ROP at maturity Source: MAS, HKFI, Company's website

19 Market Scan Which of them are Top Sellers? China Care-free Long Term Nursing LTC product SP or limited pay RP Coverage to age 100, but eligible before 59 12% of SA p.a. on disability before 60 or survival past 60 Annuity (term) Accumulated savings until retirement (low accumulation rate) Guaranteed term annuity at retirement Term up to age 80+ Annuity (whole life) Whole of life immediate annuity product Purchase at retirement age Japan New Gentle EVER Medical insurance for those with chronic disease, targeting older people Covers up to age 80 Eligibility in old age Future Support Medical and cancer insurance Hospitalization, death, CI and LTC benefit 30 year payment for those below 60 and whole for those above Smart Vision Hospital cash (to top-up government provision of medical for old age), with ROP Covers whole life (up to 100) Eligibility in old age Korea and Taiwan Whole of life medical insurance sold in Korea and Taiwan Perfect integrated insurance 1.0 CI, LTC and medical insurance CI protection age 80 years and LTC is covered until the death. Cover the whole family (up to 3 persons) Eligibility until age 65 "Kangxin" Long Time Nursing LTC income on disability (and death benefit) Coverage until age 80 Eligibility before age 60 Source: China Insurance Yearbooks, Company's website

20 Implication to Insurers From SILVER to GOLD Penetration Protection Gap Retirement Planning for Retirement Solutions for Product Features Product Sophistication Focus on Protection Living Benefit is Priority Meaningful Coverage Manageable Cost

21 Health products need to "upgrade" constantly in order to meet the needs of the customers Critical Illness insurance First CI Product in South Africa [4 diseases] List of diseases grown to as much as161 Some diseases are withdrawn due to advance medication available Multiple Pay / Early Stage CI Products available Advanced Cancer Products in Japan Now Hong Kong Life Expectancy = 75.4 Cancer Incidence = 2.80 Cancer Mortality = 1.53 Hong Kong Life Expectancy = 82.4 Cancer Incidence = 3.53 Cancer Mortality = Joint IACA, IAAHS and 1 PBSS Colloquium in Hong Kong

22 Challenges in Product Development What stop us doing it now? We have never lived for so long Guarantee vs Coverage Data Product Design Customers Distribution Perceived Value of Benefit being Uncertain Access to Customers of Different Age Groups

23 How about long term health products? Predicting future is challenging and complex Major Illnesses (e.g. Cancer) Cancer incidence trends differ by site and by country Cure technology advancement means increasing survival rate but also increasing incidence rate Medical Insurance Hospitalisation incidence and medical inflation trends are worsening People are concerned with future medical costs Product design that suits customer needs, balance risk management and profitability become a challenge Chronic Diseases People are concerned with future treatment costs of chronic diseases such as diabetes Some governments are pushing for insurance coverage

24 Practical Questions in Post Retirement Health Solutions Critical Illness vs Cancer Cash Benefit vs Reimbursement Long Term Care & DI? Mortality (Funeral only?) Accident Coverage Coverage Product Design Minesweeper Time machine for Customer already close to Retirement? Best time of Underwriting Potentially high % of Substandard Underwriting

25 Possible Post Retirement Health Solutions It is NOT a Product Solution. It is a TOTAL Solution. "Smart" design may reduce reliance of data accuracy First mover advantage -> More margin Reinsurance Data Product Design Underwrite early Packaged Products Savings may be unavoidable Challenges in Predicting Cost Education is key Highlight the facts What if questions Customers Distribution Contact your customers early Maturity Policies could be good opportunities Pick the Right Channel

26 Discussion What do you think the road will be like in the future?

27 What is post retirement healthcare? Post-Retirement Health My Challenges An emerging and exciting segment in insurance world. Post retirement healthcare is nothing new Yes there are products touching the segment needs but more product development work needs to be done. Post retirement healthcare seems crazy to me There are many challenges in providing solutions. Data, Product Design, Customers and Distribution. Let s develop a post retirement healthcare product next quarter Post retirement health solutions is more than a product solution. A right segment strategy is key. My customers are quite young and they don t need this now It is an aging society. Post retirement health solution is not cheap. Young customers have more time to accumulate the fund for comprehensive coverage

28 Thank You