CRITICAL DIAGNOSIS INSURANCE David R. Beard, ASA, MAAA, CLU AVP, Product Development EMC National...

CRITICAL DIAGNOSIS INSURANCE

David R. Beard, ASA, MAAA, CLU

AVP, Product Development

EMC National Life Company

2/23/07EMC National Life

Co.

Course Objectives

Most Common Covered IllnessesHistoryConcept of ProductAlternative Product DesignsUnderwritingRatesBenefitsMarkets


Co.

• About 1,400,000 new cancer cases are expected to be diagnosed in 2006.*

• On average, every 45 seconds someone in the United States has a stroke.**

• About every 26 seconds an American will suffer a coronary event, and about every minute someone will die from one.**

* American Cancer Society. Cancer Facts and Figures 2006. Atlanta. American Cancer Society, 2006.

** American Heart Association. “Heart Disease and Stroke Statistics – 2006 Update.” Circulation. Dallas: American Heart Association, 2006.

Incidence of Critical Illness


Co.

Survival Rates

70% Heart Attack Victims Survive At Least Three Years

75% Stroke Sufferers Are Still Alive One Year Later

The 5-Year relative survival rate for all cancers diagnosed between 1995 and 2001 is 65%.*

* American Cancer Society. Cancer Facts and Figures 2006. Atlanta. American Cancer Society, 2006.


Co.

Paying for Critical Illness

90% Dependent Upon Caregivers

Savings And Borrowed Funds Subsidize Care

Critical Illnesses Create Heavy Emotional And Financial Burdens


Co.

Harvard Law School Study, February 2005• Half of all bankruptcies in America stem from

high medical expenses. Among those whose illnesses led to bankruptcy, out-of-pocket costs averaged $11,854 even though 76% had medical insurance when they fell ill.*

* Wegner, Jonathan. Critical Illness Policies Sell, But Some Question the Need. Omaha World Herald 4 Jun. 2005: 01D.

Introduction and Facts About Critical Illness


Co.

Can You Survive Financially?

33% of Families Deplete All Or Most Of Their Savings As A Result Of A Serious Illness

67% Of All Cancer Related Costs Are Indirect, Non-medical Expenses

Experimental Medical Treatments May Not Be Covered By Your Health Insurance


Co.

History of Critical Diagnosis

Dr. Marius Barnard of South Africa– Concern About Financial Impact On

Patients

Concept Spread To United Kingdom, Japan, Australia

Introduced in Canada And United States During Late 1900s


Co.

Introduction of Critical Diagnosis/Illness InsuranceCritical Illness coverage was first offered

in South Africa in 1983.More than 70 carriers in the United

Kingdom offer Critical Illness with over $100 billion in sales since its introduction in 1987

Over 500,000 policies were sold in the first 10 months available in Japan


Co.

The Concept

Upon Diagnosis

What The Product Is Not– Terminal Illness Rider– Viatical Settlement


Co.

Traditional Products Not the Answer…If You Survive!Disability

– % of Monthly Salary– Lengthy Waiting Periods - Executives– Dependent Upon Ability to Work

Long-Term Care– Daily Benefit– Hospital Stay or Home Nursing

Requirement

Accumulation Products– Retirement


Co.

Traditional Products Not the Answer…If you Survive!Life

– Intended for dependents/beneficiaries– Not available if sufferer is alive

Health– Limited in scope/access (HMO-PPO)– Portability at risk


Co.

Product Design

Rider Attached To Life Insurance Policy

Health Policy And Riders

Treatment Of Death, By Policy Type


Co.

Critical Illness Insurance

Traditional life insurance provides financial security for your family if you die…

…but not for you if you live.Now Critical Benefits Life provides

both!


Co.

Version 1.0

$50,000 Minimum Benefit$250,000 Maximum BenefitIssue Ages 18-65 (age last birthday)Up to Table 820 Year Term Or To Age 7050% and 100% Accelerated Death BenefitWaiver of premium, accidental death, and

children’s term riders are available


Co.

Covered Conditions (1.0)

Heart AttackStrokeInvasive Cancer


Co.


Terminal IllnessNon-invasive Carcinoma - 10%

initial benefitParalysisKidney Failure Major Organ TransplantBlindness


Co.

Version 2.0

$20,000 Minimum Benefit$1,000,000 Maximum BenefitIssue Ages 18 - 65 (ALB)Up To Table 820 Year Term Or To Age 70, 50% and 100% Accelerated Death

BenefitWaiver Of Premium, Accidental

Death, And Children’s Term Riders Are Available


Co.


Loss of Independent LivingHIV for Medical PersonnelCoronary Artery Bypass Surgery -

25% BenefitCoronary Angioplasty - 10% BenefitSevere Burns


Co.

Sample Annual Premium

Male, 45, NonTobacco$100,000

Term $ 493CI 50% $ 976CI 100% $1,403


Co.

Critical Benefits Example

$100,000 Benefit 50% Acceleration Paid

Benefits Non-invasive cancer $ 5,000

Then, invasive cancer $45,000

Remaining death benefit $50,000

Total $100,000


Co.

Version 3.0

$20,000 Minimum Benefit$500,000 Maximum BenefitIssue Ages 18 - 65 (ALB)Up To Table 410 Year Term Or To Age 70 100% Accelerated Death BenefitWaiver Of Premium, Accidental

Death, And Children’s Term Riders Are Available


Co.

Advanced Stage CancerHeart AttackStrokeKidney Failure (End Stage Renal Disease)Major Organ Transplant SurgeryParalysis**Blindness**Severe Burns**Terminal Illness or DeathOccupational HIV Infection**Early Stage Cancer (25%)Coronary Artery Bypass Surgery (25%)Coronary Angioplasty (10%)** Benefits are excluded under the Children’s Rider



Co.

ALS (Amyotrophic Lateral Sclerosis or Lou Gehrig’s Disease)

Advanced Multiple Sclerosis (25%)Advanced Alzheimer’s Disease**

** Benefits are excluded under the Children’s Rider



Co.

How Product is Underwritten

Full Underwriting– Large Lump-sum Benefits– Detailed Health And Health-History

Questions– Examinations May Be Required

Simplified Underwriting– $100,000 Or Less– Short-Form Applications– Physical Exams Not Required– Accept Or Reject Basis


Co.

Additional Considerations

Morbidity vs. Mortality

Financial Underwriting

Individual vs. Worksite Markets

Genetic/Family History Importance


Co.

Industry Rate Structure

Health vs. Life Product

Policy vs. Rider Consideration

Level vs. Increasing Premiums

Guaranteed vs. Indeterminate Premiums

Reinsurance Role


Co.

Benefit Triggers

48 Worldwide Definitions Of Critical Illness

NAIC Model DefinitionsDefinitions And Analysis Of Main

IllnessesPartial-Payment ConsiderationsPayment In Event Of DeathWaiting And Survival Periods


Co.

State Compliance Issues

NAIC ModelMin Loss RatiosMax Guaranteed RatesADL’s Exclude Pre-Ex Conditions


Co.

CI Benefit Taxation

Not Clear1099 LTCAsk Your Tax Advisor


Co.

Potential Markets

Disability Income EnhancementHigh Deductible Major MedicalLifestyle Adjustment ExpensesNeeds Analysis SolutionStay At Home Parents - Child CareKey Man Business Protection


Co.

Sources of Additional Information• Critical Illness Rider for Individual

Insurance, Wendy Lee, FSA, MAAA

Actuarial Practice Forum January 22, 2007 Volume 1 Issue 2

• Gen Re Critical Illness Survey


Co.

Questions?

CRITICAL DIAGNOSIS INSURANCE David R. Beard, ASA, MAAA, CLU AVP, Product Development EMC National...

Documents

Transcript of CRITICAL DIAGNOSIS INSURANCE David R. Beard, ASA, MAAA, CLU AVP, Product Development EMC National...