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Post Retirement Health Insurance
KC Cheung, FSA Regional Product Actuary
Swiss Re, Life & Health
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
Session Number: MBR10
Post-Retirement Health My Challenges…
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
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
What is Post-Retirement Healthcare? Big topic in Medical System, "Not so big" in Insurance
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
• >50% of hospitalization in Hong Kong
• What % of "Post-Retirement Health" products in your portfolio?
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
Humanity's fundamental desire to prolong life will ensure this phenomenon will be hard to stop
Aging population in the developed world
Continuous improvement of average global standard of living
Source: Swiss Re, Economic Research and Consulting
36 3118 26
18 1527 21 17
60 64
6566
6858
6566
61
618
8 1528
8 1222
4
0%
20%
40%
60%
80%
100%
1950 2000 2050 1950 2000 2050 1950 2000 2050
0-14 (%) 15-64 (%) 65 or over (%)
Asia Europe North America
What is Post-Retirement Healthcare? It is not new… but it becomes urgent
+200% +80% +80%
Risk of Living Longer - Underestimating life expectancy How well are we Prepared for Retirement?
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
Source: Swiss Re Survey of Risk Appetite and Insurance: Asia-Pacific 2011
Not an issue! Ooops!
The Other Way to Look at This (Insurance) Cost is Increasing Tremendously
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
Source: UN World Population Prospects: The 2010 Revision
Life Expectancy 1980-1985 2005-2010 Difference
China 67.67 72.71 5 Years
Hong Kong 75.65 81.61 6 Years
Singapore 72.17 80.60 8 Years
Malaysia 68.12 73.38 5 Years
Indonesia 58.83 67.86 5 Years
Australia 75.07 81.44 6 Years
USA 74.32 77.97 3 Years
Switzerland 76.09 81.81 5 Years
Post -65 Life Expectancy
1980-1985 2005-2010 Difference
China 2.67 7.71 +188%
Hong Kong 10.65 16.61 +56%
Singapore 7.17 15.60 +118%
Malaysia 3.12 8.38 +169%
Indonesia <0 2.86 ∞
Australia 10.07 16.44 +63%
USA 9.32 12.97 +39%
Switzerland 11.09 16.81 +52%
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
Worried about medical expenses? Yes
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
8
Insert chart on report p. 27 with data labels
Source: Swiss Re Asia Risk Survey 2011
Source: Swiss Re "Would You Risk It" Report 2011
Medical Inflation It becomes a moving target
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
General Inflation
Greedy Doctors & Hospitals
Technology Advancement
Improvement in Diagnosis
Improvement in Treatment
Improvement in Living Quality
Reduction of Government Subsidy
Living Longer Demand >> Supply
Pollutions, Global Warming
Example on how medical advancement affects the world Screening Technology Effect
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
0.0
0.5
1.0
1.5
2.0
2.5
1975 1980 1985 1990 1995 2000 2005
Rate
per
mille
0%
5%
10%
15%
20%
25%
30%
35%
40%
US Prostate Cancer incidence
Incidence
Prevalence of PSA testing
Prev
alen
ce o
f PSA
test
ing
at a
ges
65-8
4
Most healthcare reform happening in Asia shifts burden to consumers
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
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
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 public-private 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
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
Asia is Aging Healthcare Needs are not being met
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
Greater life expectancy is extending retirement planning horizon
Growing middle class are demanding greater access to healthcare
Governments are increasingly shifting the burden of care to its citizen
The young workforce population of the 70's and 80's are growing old
Longevity Aging
Wealth Governments
Post-retirement Health
Implication to Insurers From SILVER to GOLD
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
Getting serious illness and inability to pay
medical expenses are two biggest drivers for insurance purchases
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
14 Source: Swiss Re Asia Risk Survey 2011
Main worries/concerns for the future that might lead you to consider buying life/health insurance (in %)
Market Scan Our Product Offers (partially) met Customer Needs
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
Retirement Planning Products means:
• Savings Pot – Relatively small • No Guidance on how to spend it
What is Your Number?
• Inflation greatly erodes value of benefit • I am covered by corporate plan. Should I over-insure now?
Long Term / Whole Life Coverage – Level benefit
• What if premium increase is more than I can afford after retirement?
Long Term / Whole Life Coverage – "Level" Premium
Annuity options? Or Savings plans?
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
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.
• Annuity options take longer period of time to breakeven the principal invested
Younger generation
• It's too late for them to buy annuities as they could not fully benefit from the payouts.
Elders
Customers' concerns:
Products for Aging Risk
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
? I am living longer than I expected!!
? I couldn't afford insurance when I was young, can I
get some now?
Up-selling Existing
Policyholders with GI / SI Guaranteed
Issue Whole Life / Funeral Plans
? I am living longer than I expected – do I have enough savings?
Annuity, lump sum or regular
payment
Multiple Pay Medical or
Health Coverage
Limited Pay Whole Life /
Long Term Rate Guarantee
Market Scan Which of them are Top Sellers?
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
Singapore Hong Kong Malaysia
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
Guaranteed immediate annuity Lifetime annuity for those
aged 55-75 Annuity based on yield on SP from 5-7% ROP at maturity
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
PRU Senior Med Term life policy with medical
benefits Hospitalization until age 80 Eligibility from age 45-70
Mediguard Senior Medical insurance Hospitalization benefits Eligibility from age 56-65 Guaranteed renewal up to 75, age 80
discretionary
Source: MAS, HKFI, Company's website
Market Scan Which of them are Top Sellers?
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
Japan China Korea and Taiwan
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 "Kangxin" Long Time Nursing LTC income on disability
(and death benefit) Coverage until age 80 Eligibility before age 60
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
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
Source: China Insurance Yearbooks, Company's website
Implication to Insurers From SILVER to GOLD
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
Penetration
• Protection Gap • Retirement Planning for 35-45 • Retirement Solutions for 45-55
Product Features
• Focus on Protection • Living Benefit is Priority
Product Sophistication
• Meaningful Coverage • Manageable Cost
Health products need to "upgrade" constantly in order to meet the needs of the customers
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
Critical Illness insurance
21
1983 2008 Now
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
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 = 1.15
Challenges in Product Development What stop us doing it now?
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
• Access to Customers of Different Age Groups
• Perceived Value of Benefit being Uncertain
• Guarantee vs Coverage
• We have never lived for so long
Data Product Design
Distribution Customers
How about long term health products? Predicting future is challenging and complex
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
•Cancer incidence trends differ by site and by country •Cure technology advancement means increasing survival rate but also increasing
incidence rate
Major Illnesses (e.g. Cancer)
•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
Medical Insurance
•People are concerned with future treatment costs of chronic diseases such as diabetes •Some governments are pushing for insurance coverage
Chronic Diseases
Practical Questions in Post Retirement Health Solutions
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
• Critical Illness vs Cancer
• Cash Benefit vs Reimbursement
• Long Term Care & DI?
• Mortality (Funeral only?)
• Accident Coverage
Coverage
• Minesweeper • Time machine for
Customer already close to Retirement?
Product Design • Best time of
Underwriting • Potentially high %
of Substandard
Underwriting
Possible Post Retirement Health Solutions It is NOT a Product Solution. It is a TOTAL Solution.
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
• Contact your customers early
• Maturity Policies could be good opportunities
• Pick the Right Channel
• Education is key • Highlight the facts • What if questions
• Underwrite early • Packaged Products • Savings may be
unavoidable • Challenges in
Predicting Cost
• "Smart" design may reduce reliance of data accuracy
• First mover advantage -> More margin
• Reinsurance
Data Product Design
Distribution Customers
Discussion What do you think the road will be like
in the future?
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
Post-Retirement Health My Challenges…
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/
• An emerging and exciting segment in insurance world.
What is post retirement healthcare?
• Yes there are products touching the segment needs but more product development work needs to be done.
Post retirement healthcare is nothing new
• There are many challenges in providing solutions. Data, Product Design, Customers and Distribution.
Post retirement healthcare seems crazy to me
• Post retirement health solutions is more than a product solution. A right segment strategy is key.
Let’s develop a post retirement healthcare product next quarter
• It is an aging society. Post retirement health solution is not cheap. Young customers have more time to accumulate the fund for comprehensive coverage
My customers are quite young and they don’t need this now
Thank You
Joint IACA, IAAHS and PBSS Colloquium in Hong Kong www.actuaries.org/HongKong2012/