Critical Illness Products in South Africa

Critical Illness Products in South Africa An overview 1 ICA Cancun 2002 - Critical Ilness

Agenda Historical development Trends & recent developments in product design Market statistics 2 ICA Cancun 2002 - Critical Ilness

A rose by any other name... Dread disease Critical Illness Severe Illness Living assurance benefits Trauma assurance 3 ICA Cancun 2002 - Critical Ilness

Historical Development 4 ICA Cancun 2002 - Critical Ilness

First product Company: Crusader Life Reinsurer: GeneralCologne Re Developer: Dr. Marius Barnard Aim: To provide for financial needs following severe or life-changing events First sale: 1983 First claim: 1 December 1984 GeneralCologne Re pricing model published in 1986 5 ICA Cancun 2002 - Critical Ilness

Historical Evolution First product covered 4 conditions Heart attack Stroke Coronary artery disease requiring surgery Cancer These conditions cover 90% of all claims 6 ICA Cancun 2002 - Critical Ilness

Historical Evolution In South Africa Further 8 ( core definitions) Developed to a further 21 ( extended definitions) Now differing severity level critical illness coverage Some are not diseases or illnesses but surgeries or states of health Currently 58 conditions covered world wide 7 ICA Cancun 2002 - Critical Ilness

Trends & Recent Developments 8 ICA Cancun 2002 - Critical Ilness

Trends & recent developments Medical Advances Product differentiation & niche focusing Product enhancements 9 ICA Cancun 2002 - Critical Ilness

Medical Advances Disease detection has improved E.g. smaller heart attacks can be detected Need to revise definitions Treatments have improved These micro events led to severity levels 10 ICA Cancun 2002 - Critical Ilness

Product Differentiation & Niche Focus More varied product designs than life assurance By company Definitions & benefits Niche Focus by target market By country/region Medical definitions Different disease prevalence 11 ICA Cancun 2002 - Critical Ilness

Product Differentiation & Niche Focus Driving Forces of differentiation Grow market size Grow market share Be perceived as innovative Reduce cost Reduced commoditisation Increase profitability 12 ICA Cancun 2002 - Critical Ilness

Product Enhancements New product development: Severity Levels First seen in 2000 in SA Innovative Comprehensive product with lower rates Cover families under one policy Three condition categories Flexibility 13 ICA Cancun 2002 - Critical Ilness

Conditions Category 1 May select any or all of a group of core conditions Category 2 If all in category 1 are selected, these are automatically covered Category 3 Optional or stand-alone conditions Flexible to cover needs of family 14 ICA Cancun 2002 - Critical Ilness

Severity Levels Benefit payments are linked to severity levels Severity levels are determined by pre-defined objective medical definitions Multiple payments are allowed for single or multiple conditions Cover is selected for Severity levels A-D (100%, 75%, 50%, 25%) or A-G (100%-5%) 15 ICA Cancun 2002 - Critical Ilness

Example - Cancer Severity Levels Level Definition Benefit paid A B C D Stage 4: tumour extending beyond organ with nodes and/or distant metastases Stage 3: tumour within organ with re-gional lymph node spread Stage 2: tumour invading organ, no lymph node involvement Stage 1: primary tumour site with no spread within organ 100% 75% 50% 25% E Carcinoid syndrome or pre-leukemia syndrome 15% G Basal cell carcinoma >4 cm, squamous cell carcinoma >4 cm, prostate cancer T1N0M0 5% 16 ICA Cancun 2002 - Critical Ilness

Market reaction Heated debate among competitors Brokers finding comparisons difficult Product is well received in market Selling well 17 ICA Cancun 2002 - Critical Ilness

Market Statistics 18 ICA Cancun 2002 - Critical Ilness

Industry Experience: Males vs Females (Source: ASSA CSI Dread Disease Investigation ) 0.01200 0.01000 Males Females 0.00800 0.00600 0.00400 0.00200 0.00000 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60+ 19 ICA Cancun 2002 - Critical Ilness

Industry Experience: Males vs Females (Source: ASSA CSI Dread Disease Investigation ) 0.00160 0.00140 Males Females 0.00120 0.00100 0.00080 0.00060 0.00040 0.00020 0.00000 1991 1992 1993 1994 20 ICA Cancun 2002 - Critical Ilness

Industry Experience: Males/Females vs Mortality (Source: ASSA CSI Dread Disease Investigation ) 0.04000 0.03500 0.03000 SA85-90 Males Females 0.02500 0.02000 0.01500 0.01000 0.00500 0.00000 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60+ 21 ICA Cancun 2002 - Critical Ilness

Male experience by duration 0.01000 0.00900 0.00800 Duration 0 Duration 1+ 0.00700 0.00600 0.00500 0.00400 0.00300 0.00200 0.00100 0.00000 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55+ 22 ICA Cancun 2002 - Critical Ilness

Male experience by sum assured 0.01200 0.01000 SA < R 100 000 SA >= R 100 000 0.00800 0.00600 0.00400 0.00200 0.00000 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55+ 23 ICA Cancun 2002 - Critical Ilness

Male experience by sum assured and duration 0.00300 SA < R 100 000 0.00250 SA >= R 100 000 0.00200 0.00150 0.00100 0.00050 0.00000 0 1 2 3 4 5+ Duration 24 ICA Cancun 2002 - Critical Ilness

Comparing SA and Asia - Males 0.01400 0.01200 0.01000 SA85-90 Observed SA Rate Graduated DD Survey 0.00800 0.00600 0.00400 0.00200 0.00000 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 25 ICA Cancun 2002 - Critical Ilness

Comparing SA and Asia - Females 0.01400 0.01200 0.01000 SA85-90 Observed SA Rate Graduated DD Survey 0.00800 0.00600 0.00400 0.00200 0.00000 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 26 ICA Cancun 2002 - Critical Ilness

Claims breakdown - Males GeneralCologne Re SA Asian Dread Disease Survey 3% 8% 1% 11% 14% 4% 16% 37% Heart Attack Cancer Coronary Artery Stroke Kidney Failure Other 6% 7% 36% 58% 27 ICA Cancun 2002 - Critical Ilness

Claims breakdown - Females GeneralCologne Re SA Asian DD Survey 0% 0% 7% 0% 4% 4% 2% 6% 1% 0% Heart Attack Cancer Coronary Artery Stroke Kidney Failure Other 89% 86% 28 ICA Cancun 2002 - Critical Ilness

Questions??? 29 ICA Cancun 2002 - Critical Ilness