critical diagnosis insurance david r. beard, asa, maaa, clu avp, product development emc national...
TRANSCRIPT
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
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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
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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.
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Co.
Paying for Critical Illness
90% Dependent Upon Caregivers
Savings And Borrowed Funds Subsidize Care
Critical Illnesses Create Heavy Emotional And Financial Burdens
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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
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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
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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
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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
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Co.
The Concept
Upon Diagnosis
What The Product Is Not– Terminal Illness Rider– Viatical Settlement
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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
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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
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Co.
Product Design
Rider Attached To Life Insurance Policy
Health Policy And Riders
Treatment Of Death, By Policy Type
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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!
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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
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Co.
Covered Conditions (1.0)
Heart AttackStrokeInvasive Cancer
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Covered Conditions (1.0)
Terminal IllnessNon-invasive Carcinoma - 10%
initial benefitParalysisKidney Failure Major Organ TransplantBlindness
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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
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Co.
Covered Conditions (2.0)
Loss of Independent LivingHIV for Medical PersonnelCoronary Artery Bypass Surgery -
25% BenefitCoronary Angioplasty - 10% BenefitSevere Burns
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Co.
Sample Annual Premium
Male, 45, NonTobacco$100,000
Term $ 493CI 50% $ 976CI 100% $1,403
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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
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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
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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
Covered Conditions (3.0)
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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
Covered Conditions (3.0)
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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
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Additional Considerations
Morbidity vs. Mortality
Financial Underwriting
Individual vs. Worksite Markets
Genetic/Family History Importance
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Industry Rate Structure
Health vs. Life Product
Policy vs. Rider Consideration
Level vs. Increasing Premiums
Guaranteed vs. Indeterminate Premiums
Reinsurance Role
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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
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State Compliance Issues
NAIC ModelMin Loss RatiosMax Guaranteed RatesADL’s Exclude Pre-Ex Conditions
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CI Benefit Taxation
Not Clear1099 LTCAsk Your Tax Advisor
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Co.
Potential Markets
Disability Income EnhancementHigh Deductible Major MedicalLifestyle Adjustment ExpensesNeeds Analysis SolutionStay At Home Parents - Child CareKey Man Business Protection
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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
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Co.
Questions?