trauma product developments - actuaries institute · multi-trauma • claim for multiple traumas...

Trauma Product Developments

Robert Kerr

• The Australian Trauma market has developed over the last 30 years

• Competition in Trauma products primarily aimed at increasing conditions covered and the definition of condition.

• This presentation will look across the globe at the development of critical illness / trauma products.

• The impact that standardised definitions have had in these markets and what the impact may be on Australia.

• Ideas from these markets of the product structures and features which could encompass the next generation of products.

History of Critical Illness

First products launched in 1983 in South Africa

Insurer: Crusader LifeReinsurer: Gen ReDeveloper: Dr Marius Barnard

Aim: “ to provide for financial needs following severe or life changing events”

4 Conditions: Heart Attack, Stroke, Cancer, Coronary artery disease requiring surgery (CABG)

1st Claim: 1 December 1984

Development of Trauma

• Developed across the world

– 1986 UK and Ireland

– 1987 Australia

– Late 80s Hong Kong, Singapore, Malaysia, Taiwan

– 1995 China

• Number of conditions have increased in almost all markets

• Driven by competition

• Still 98% claims by top 10 conditions

Standardised Definitions

• Taiwan

• UK

• Singapore

• China

• South Africa

• India

Taiwan - 1989

• First standardisation Taiwan in 1989

– Tariff market with strict pricing and product approval

– Driven by regulators approval process

• Only just been reviewed after 6 year process

• Now includes

• 7 severe illnesses (1 January 2016)

• 7 minor illnesses (1 April 2016)

UK - 1999

• Standardisation was called for by advisors

• Initially included 20 conditions

• Critical Illness must include Cancer, Heart Attack and Stroke

• Definitions are a minimum standard

• Includes defined terms e.g. irreversible, permanent

• Includes model exclusions

UK – 1999 continued

• Updated 2002, 2004, 2006, 2011, 2014

• Aim to include a model definition if 75% of policies include the

condition

• Currently includes 23 conditions

• Most providers offer in excess of 35 conditions and compete on extent of cover provided

Singapore - 2003

• Standardised 37 conditions

• Maximum number of conditions covered 30

• 2014 Review

– Revised definitions

– Removed cap on conditions – competition commission

• Generally limited competition on conditions

China - 2007

• 25 Standardised definitions

• Being reviewed - over 6 years !

South Africa -2011

• First standardisation in 2011

• Updated in 2015

• Aim of standardisation was improve clarity and comparability

• Standardised 4 core conditions at 4 different severity levels.

• Each company must pay 100% at one of the levels and state how much they pay at each level.

• Additional severity and conditions can be covered.

India - 2013

• 11 standardised definition

• 2016 Upgrade

– Revised some definitions

– Added 11 more conditions

Australia - 2017

• 3 standardised definitions

• Cancer, Heart Attack, Stroke

Review Process

• Reviews can be delayed

– Taiwan took over 20 years,

– China is currently reviewing but very slowly

• Singapore – will review once every 3 years

• UK typically every 3 years

• Australia proposed every 3 years

Expectation for Australia

• More conditions will be covered quickly

• Review in at least 3 years

• Will have limited impact on competition

– most providers going beyond the minimum standards.

– Rating houses important

• May go further than conditions

– Exclusions

– Standard terms

TRAUMA DEVELOPMENTS

MULTI PAY

Reinstatement / Buybacks

• Death reinstatement first introduced in South Africa

• Popular in Australia since late 1990s

• Trauma reinstatement launched in Australia in early 2000s

Reinstatement / Buyback

Why?

• Can provide mortality cover even

after they have suffered a Trauma

• Can cover more than one Trauma

• Life insured does not need new evidence of health

Design issues

• Reinstate Death, Trauma or both

• Compulsory or Optional

• What premium to charge - none, previous premium, new

business premium

• What conditions are covered or not covered

• Waiting period before reinstatement

• Restrictions – maximum age, maximum sum assured

Conditions Covered

• Exclusion of claims directly or indirectly caused by or related

to the original event claimed

Conditions Covered

• Groups – exclude

conditions in the same

group

Multi-Trauma

• Claim for multiple traumas

• Benefit 20% of sum assured for each Trauma

• Each Trauma is “Independent”

– One claim per condition

– Minimum 6 months since last diagnosis of same condition

– Not a recurrence of a condition

– Not directly or indirectly caused or related to a condition or symptoms for a condition where a benefit has been paid for.

• Accelerated and Standalone versions

SEVERITY BASED TRAUMA

Severity Based Critical Illness Products

• Benefit payment linked to severity of disease

• Severity level determined by pre-defined objective medical definitions

• Allow multiple claims for different stages of illness progression

• Full financial coverage when battling against unexpected Trauma

• More comprehensive protection vs. standard Trauma product

• More closer reflects need – less “windfall”

what

why

• Originally launched by Discovery in South Africa in

2000

• Common in Singapore, Malaysia, Indonesia where

around 40% of providers offer

• Available in UK, New Zealand and Australia.

Severity Based CI in Southeast Asia

Early stage

cancer

• CIS

• Early prostate

cancers

• Early thyroid cancer

• Papillary micro-

carcinoma of the

bladder

50% or up to

US$80,000,

whichever is

lower

Catastrophic

Cancer

Stage IV cancer with

the presence of

distant metastasis

200%

Major

cancerCancer, excluding

early cancer100%

Cancer coverageSum

AssuredUp-grading

50%

Relapse benefit

After 365 days from remission

Sum insured:Typically not more than US$800,000

Premiums

not guaranteed

Waiting period is 180

days from policy issue

for early cancer and 90

days from policy issue

for cancer

A survival period of 30

days applies

Example of a typical product structure (Cancer )

Intermediatestage

cancer

• Mastectomy due to

CIS of breast

• Prostatectomy due

to T1a or T1b

prostate cancer

100% or up

to

US$160,000,

whichever is

lower

Additional conditions

10-25%

additional

benefit

payout

Severity Based CI in NZ

• 60+ conditions

• 5 categories

• Sum Assured

applies to

each

category

Severity Based in UK

• Serious Illness from Vitality

• 175 conditions covered

• Primary (114 conditions) and

Comprehensive (175 conditions)

Severity Based in UK

• Serious Illness Booster

– Double payment for long term conditions

• Cancer Relapse

– 50% payment boost if recurrence after 12 months in

remission

• Protected Cover

– allows to increase cover back to 100% up to 3 times

– Plus another payment for life cover

– Trauma claim for unrelated condition

Cardiac-Care

• Diagnosis Benefit

• Early Stage (25% SA, max 4 times)

• Moderate Stage (50% SA, max 2 times)

• Severe Stage (100% SA, max 1 time)

• Multiple claims even on same condition

• 1 year waiting period applies (6 months if claiming for different condition)

• Indexation Benefit

• 10% SA increase for every claim free year up to a cap of 50% increase from base sum

assured

• Hospitalization Benefit

• 1% SA per day of hospitalization due to covered illnesses

Underwriting and Claims

• Underwriting may be more comprehensive

– Cover for more minor conditions

– Potential for more anti-selection

• Claims

– More complex claim definitions

– Pressure to pay at higher definition

Pricing

• More Art than Science?

• Need to understand progression of conditions

• Impact of future technology more complicated

– more minor conditions – but fewer major as treated earlier?

• Experience does exist in other markets

• For more basic severity based price can be up to 30% cheaper but varies by age and gender.

• Reviewable rates are helpful

Market Reactions

• Brokers

– Like comprehensive nature

– Dislike complexity and lack of comparability

• Consumers

– Perceived as fairer

– More likely to have a payout

– Same price for cover (or less)

SEVERE TRAUMA

Severe Trauma

• A slightly less complex version of severity

• And a bit more flexible

– to meet needs

– to meet budgets

Building blocks

Severe Trauma

Trauma

Early Trauma

Building blocks

Severe Trauma

Trauma

Early Trauma

Building blocks

Severe Trauma

Trauma

Early Trauma

Example

Stage III Cancer

Stage I Cancer

Carcinoma in situ

Is Modular the next step?

Cancer Heart &

Arteries

Brain and

Nerves

Loss of

Function

Other Health

Events

Severe Trauma

Trauma

Early Trauma

Traditional trauma

Cancer Heart &

Arteries

Brain and

Nerves

Loss of

Function

Other Health

Events

Severe Trauma

Trauma $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000

Early Trauma $100,000 $100,000 $100,000 $100,000 $100,000

Using Severe Trauma to reduce cost

Cancer Heart &

Arteries

Brain and

Nerves

Loss of

Function

Other Health

Events

Severe Trauma $500,000 $500,000 $500,000 $500,000 $500,000

Trauma $500,000 $500,000 $500,000 $500,000 $500,000

Early Trauma $100,000 $100,000 $100,000 $100,000 $100,000

Cancer Only

Cancer Heart &

Arteries

Brain and

Nerves

Loss of

Function

Other Health

Events

Severe Trauma $500,000

Trauma $500,000

Early Trauma $100,000

Bespoke

Cancer Heart &

Arteries

Brain and

Nerves

Loss of

Function

Other Health

Events

Severe Trauma $500,000 $1,000,000

Trauma $250,000 $250,000 $250,000 $500,000 $250,000

Early Trauma $100,000 $100,000 $100,000 $100,000 $100,000

SIMPLE TRAUMA

Key 3

• 3 Critical Illnesses

– Heart Attack

– Cancer

– Stroke

• No Partials

• No Options

• Waiver of premium

http://e1.aig.com/key

Scottish Widows

“Removing complexity will also make

things clearer and simpler for advisers

and clients alike, with no complicated

policy conditions to work out at that all-

important point of claim.”

Cancer in-situ paid where surgery

necessary – for all sites

Combined Alzheimer's, Dementia etc

Unum Simplicity

• Group CI

• 10 most common conditions

• Plus childrens cover

• Benefits – flat cover amount up to ₤60,000

http://online.positiveimagesuk.com/unum/download/UP3284.pdf?5d341c43-2ed1-5362-f04f-58b41870d915

SUMMARY

Summary

• Standardisation of trauma conditions is common

• It has not limited competition

• Competition

– More covered conditions

– More choice and flexibility

– But more complexity