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A Critical Table –Pricing Critical Illness in the UK on a new Insured Lives Table
Paul Brett and Johann DuToit
IAAHS 2007IAA Health Section Colloquium
13th – 16th May 2007CTICC
www.iaahs2007.com25
30
35
40
45
50
0.0
20.0
40.0
60.0
80.0
100.0
120.0
Age
Accelerated CI rates per 10,000
FNS
FSM
MNS
MSM
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Agenda
• Introduction• Basic Methodology & Issues• Headline Results• International Aspects• Questions
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Agenda
• Introduction• Basic Methodology & Issues• Headline Results• International Aspects• Questions
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Why Produce the Paper?
• The Actuarial Profession - CMI
• Available tables;– Theoretical– Population– Aggregate
CIBT02 Tables
0.000000
0.005000
0.010000
0.015000
0.020000
0.025000
0.030000
30 40 50 60
Age
Rat
e Males
Females
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Why Produce the Paper?
• Issues with the insured lives data;– Immature– Limited age range– Estimates of date of diagnosis– Data needs grossing-up
• Regulations;– Realistic balance sheet– Gender Directive
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Agenda
• Introduction• Basic Methodology & Issues• Headline Results• International Aspects• Questions
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CMI Data• 1999 – 2002 data
– 16 offices– 7.4 million life years– 11,803 claims– 90% ACI and 10 % SCI
• Date of diagnosis– 44% no date recorded– No uniform definition– Estimated Date of Diagnosis
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Settled to Diagnosed Adjustments
• SDA = (B + C) / (A + B) > 1 if C > A• Distinguish by:
– Condition (long settlement delays have bigger SDAs)– Duration since Inception (more scrutiny on early duration claims)
1 9 9 9
2 0 0 2
Y e a r o f D ia g n o s is
1 9 9 9 2 0 0 2Y e a r o f
S e tt le m e n t
B
A
C
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Causes of Claim
• Conditions;– 21 standardised CI conditions– Death, TPD and Angioplasty
• Rates by condition• Further adjustments
– Smoker status unknown– Unknown claims cause– Under representation– Removal of other claims
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Adjusted Data
• Exposure– Raw 7.397 million– Modified 7.351 million
• Claims– Raw 11,803– Modified 13,452
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CIBT02
• CIBT93• CI Healthcare Study Group• Theoretical population table
– First ever event– Overlap between
conditions• Rates by condition
CIBT02 Tables
0.000000
0.005000
0.010000
0.015000
0.020000
0.025000
0.030000
30 40 50 60
Age
Rat
e Males
Females
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Insured Lives Rates
• Insured lives rate for given condition =CIBT02 rate for given condition
x A / E for given condition• Insured / Population (I/P) adjustment
– Effect of underwriting– Socio economic– Smoking status
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Further Adjustments
• Select rates– Differ by condition
• ACI different to SCI
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Agenda
• Introduction• Basic Methodology & Issues• Headline Results• International Aspects• Questions
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ACI Results
• CI Table fits “All ACI Claims” 100%• Do Individual Rates fit CMI Individual
Claims data?• We followed a “Grouped Illness” approach
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ACI Grouped Conditions
Deaths & Terminal IllnessTotal & Permanent Disability
•Kidney Failure•Major Organ Transplant
Organ Failure-type
•Coma•Paralysis•Blindness•Loss of Limbs•Third Degree Burns•Loss of Hearing
Accident-type
•Multiple Sclerosis•Motor Neurone Disease•Parkinson's Disease•Alzheimer's Disease
Neurological-type
•Heart Attack•Stroke•Coronary Artery By-pass•Heart Valve Replacement•Angioplasty•Aorta Graft Surgery
Cardiovascular -type
•Benign Brain •Tumour Cancer•Loss of Speech (e.g. throat cancer)
Cancer-typeConditionsGroups
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I / P Adjustments
19%Accident-types
71%Cancer-types
63%Neurological-types
38%Cardiovascular-types
20%Organ Failure-types
16%TPD
47%Deaths
I/P AdjustmentGroup
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Select Pattern
• Effect of Underwriting in Descending order:
Ult-7.7%-42.1%-45.0%3 yearsOrgan Failure-23.0%-77.9%
Select Discounts
UltNoneAccidentUlt-17.2%1 yearCancer (MNS)Ult-48.9%1 yearNeurologicalUlt-4.5%-22.4%2 yearsCardiovascular
Ult-15.4%-18.4%3 yearsDeath (MNS)Ult-15.8%-47.7%3 yearsTPD
Select Period
Condition
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Increase by Age
• Female Cancer increases by 15% p.a. from young ages• UK Insured Life only Mortality rates increase in a similar
fashion but slightly faster.
9.1%8.5%9.4%9.1%60-70
7.4%6.3%9.5%10.4%50-60
8.4%8.5%12.5%10.7%40-50
8.6%9.4%9.9%6.8%30-40
8.3%10.0%4.7%3.9%20-30
FSMFNSMSMMNSAge Band
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Smoker differentials
8%53%44%654%65%23%451%55%46%25FNS
18%39%91%6521%33%114%451%38%25%25MNS
% HA% CancerSmoker
differentialAgeSex
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Experience by Benefit Size
• The Benefit curve is U-shaped• Consistent poor experience at
high Sums Assured in the UK• Correct level is around 90%
10,51111,73923110,2801,227Claims
90%100%1082%89%1194%A/E
SA: >£10KAllSA: >£150KSA: £11K-£150KSA: <= £10KACI
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90% of Insured Table
95.1%Bancassurance Office D
90.4%Bancassurance Office C
87.3%IFA Office B
84.2%IFA Office A
A/E on Insured TableClient Offices
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Experience by Channel
£45,646119%99%92%3,033Direct Sales
£50,159107%89%92%4,072Bancassurer
£58,076100%83%83%2,625IFA
Average SA
Relative to IFA
Revised for Channel
Error
SA: £11K-£150K
Published ClaimsChannel
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1999-2002 v 2003-2004
• Based on “Raw claims” excl. any adjustments• Red > Blue• SDA for 1999-2002 > SDA for 2003-2004
80%82%71%89%64%83%90%FSM: 03-04
80%88%74%74%81%85%74%FSM: 99-02
78%79%78%71%68%82%84%FNS: 03-04
82%74%81%83%87%86%85%FNS: 99-02
71%69%64%73%66%71%80%MSM: 03-04
84%71%74%94%87%85%95%MSM: 99-02
74%78%65%68%66%73%83%MNS: 03-04
84%84%76%85%91%84%84%MNS: 99-02
All5+43210Duration
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Standalone ExperienceACI & SCI Experience
50
60
70
80
90
100
110
120
130
ACI SCI
Rel
ativ
e Ex
perie
nce
Deaths
CI Conditions only
• Deaths after 28 days (survival period):– Under SCI it is paid as a critical illness– Under ACI it may be paid as a death claim
• SCI experience is at 107% v 125% for ACI
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Agenda
• Introduction• Basic Methodology & Issues• Headline Results• International Aspects• Questions
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International Aspects
• Problems with large cases• Grouping of conditions• Rates by condition• Date of diagnosis• SCI > ACI
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Comparison: RSA v UKComparison: RSA v UK CI Rates
0%
20%
40%
60%
80%
100%
120%
140%
160%
25 35 45 55
Age
RSA
/ UK
Rate
s
MalesFemales90% Level
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Comparison: Far East v UKFar East / UK CI Rates
0%
20%
40%
60%
80%
100%
120%
25 35 45 55
Age
Far E
ast /
UK
Rate
s
MalesFemales90% Level
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Agenda
• Introduction• Basic Methodology & Issues• Headline Results• International Aspects• Questions
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Updates & Queries
• Paper & Tables:www.genrelifehealth.com/uk
• Contact [email protected] @genre.com
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IAAHS 2007IAA Health Section Colloquium
13th – 16th May 2007CTICC
www.iaahs2007.com
25
30
35
40
45
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20.0
40.0
60.0
80.0
100.0
120.0
Age
Accelerated CI rates per 10,000
FNS
FSM
MNS
MSM
HeartAttack
HeartAttack Minor
CIs
MinorCIs
KidneyFailure
KidneyFailure
MOTMOT
DeathDeath
MSMSCABGCABG
StrokeStroke
TPDTPD
CancerCancer
CICI