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Group Critical Illness
- A Business Development Perspective
IP – 18 Group Living Benefits
CIA Meeting Nov 13 – 14, 2008
Tim Griffin, FCIA, FSA
AVP Product and Business Development, Special Markets
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Agenda
•Background and International Perspective
•Group and Individual Comparison
•Marketing Opportunity
•Product Details and Fine Print
•Recent Developments
•Questions?
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Background
* History:• In December 1967, in South Africa, the first
heart transplant was performed by Dr. Christiaan Barnard, assisted by his brother Dr. Marius Barnard
• Dr. Marius Barnard realized that saving people’s lives could create a financial liability
• In 1983, developed the world’s first CII policy
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Background
* Inception dates:• South Africa - 1983
• United Kingdom - 1985
• Australia - Late 80s
• Canada - Individual 1993
- Creditor 1997
- Group 1999
• United States - 1998
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CII Market in Canada – Group
* Growth• Slow in traditional markets; steeper in Creditor
• Importance of CII is growing due to increasing odds of surviving a critical illness and employers offering the product
* Product• Group CI product generally covers fewer illnesses than
individual product – although number of conditions is growing
• Offered as mandatory and voluntary
* Great potential• Untapped market
• Interest from employers to enhance current benefit program, offer voluntary supplemental health product
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CII Market in Canada – Individual
* Client Profile in Canada
Who they are What they are buying
Average age is around 40 Average annual premium is about $1,000
75% between 35 and 54 Average benefit amount is $100,000
50% are to females Coverage for about 24 conditions
Over 80% are non-smokers
A majority of sales have a return of premium featureSource: Product Innovation in Living Benefits presentation,
Munich Re, September 2005.
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Market Opportunity
* Emerging awareness of critical illness incidence
* Increasing odds of surviving critical illness with medical advances
* Financial strain associated with life-threatening diseases
* Trend in individuals shouldering increasing portion of health care costs
* Prescription drugs
* Public hospitals private clinics
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* 38 % of Canadian women and 44 % of men will develop cancer in their lifetime
* More than 70,000 Canadians are expected to suffer from a heart attack this year
* Over 30 % of all new breast cancer diagnoses are in women, aged 20-49
* 6,500 Canadians aged 15 – 39 diagnosed with cancer each year
Sources:- National Cancer Institute of Canada, Canadian Cancer Statistics, 2006- Heart and Stroke Foundation of Canada, 2007 - Surveillance Division, CCDPC, Public Health Agency of Canada, 2003- Globe and Mail, July 7, 2008
Market Opportunity – Incidence
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Market Opportunity – Incidence
* What are your chances?
0%
10%
20%
30%
40%
50%
60%
30 35 40 45 50 55
Chance of C.I. by age 75
Chance of death by age75
Male non-smoker
Source: Munich Re
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Market Opportunity – Survival
* Better odds of surviving life-threatening illness support the need for Critical Illness insurance:
• Over 80 % of heart attack victims admitted to a hospital survive
• 62 % of people who are diagnosed with cancer survive at least 5 years
Sources:- Heart and Stroke foundation of Canada, 2007 - Canadian Cancer Society, Canadian Cancer Statistics 2008
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Market Opportunity – Financial
* Can patients afford to survive?• 49 % of Canadians do not have a financial plan to
deal with a critical illness
* Financial consequences can be devastating:• 54 % use money from their savings
• 18 % mortgage or sell their house / other valuables
• 7 % rely on help from their family members / relatives
Source: Ipsos-Reid News Release, June 23, 2005
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Market Opportunity – Plan Sponsor
• Offer enhanced benefit program to become “employer of choice”
* Complements their existing group insurance:
• Life insurance, by providing living benefit to insured
• Disability insurance, by offering benefit based on diagnosis, not tied to ability to work
• Health insurance, by helping to pay for both medical and non-medical expenses
• Look for optional supplemental health products – without additional costs
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Product - Benefit Payout
* Paid in full upon approval of claim after survival period (typically 30 days)
* Regardless of ability to work
* Whether or not medical expenses incurred
* In addition to other insurance benefits
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Product - No Spending Restrictions* Can use the benefit payout for:
•Mortgage and other debt obligations
•Ongoing expenses
•Home modifications
•Medical expenses (e.g. drugs not covered by provincial health plan)
•Or any other additional expenses
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Product - The Fine Print
* Survival period:
• Time period that insured has to survive after diagnosis
• Generally 30 days unless otherwise specified
* 90-day waiting period for cancer
• No coverage for cancer if diagnosed or had symptoms within 90 days following coverage effective date
• Pre-existing condition limitation
• Typically 24 /24
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Product - Medical Underwriting
* Basic and Optional guaranteed issue
• Do not require evidence of insurability
• Subject to pre-existing condition limitation
* Medical information requirements are different from Group Life insurance:
• Detailed medical questionnaire
• More automatic screening requirements
• Longer average turnaround time (10 to 15 days)
• Higher decline rate on average (2 – 3 times life)
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Product - Claims
* Process differs from other products:
• Claim forms specific to covered illness
• Complex adjudication process – illness definition, exclusions, pre-existing conditions, etc
• Longer turn around time than Group Life (more comparable to Disability insurance)
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Product - Claims* Claims – Distribution by Cause
Source: Munich Re Group CI 2006 Survey results
70%
15%
5%
3%
3%
4% Cancer
Heart Attack
Stroke
MS
Bypass Surgery
Other
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Product - Claims
* Approximately 25 % of claims are declined:
* Diagnosis predates coverage effective date
* Claim is submitted for a condition not covered
* Claim is based on a pre-existing condition
* Claim is submitted within 90-day waiting period for cancer
* Claim is does not met the Illness definition
* Non-disclosure of existing medical conditions
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Group CII Success Factors
* Critical success factors
• Clarity in product design – easy to understand
• Competitive plan design and pricing
• Plan sponsor support – endorsement, communication and education
• Integrated component of group benefits package
• Increased access = better spread of risk = more affordable coverage
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Current market
* More NEMs - less medical u/w
* More pull from plan sponsors
* Partial payment
* Second payment
* Portability
* Loss of Independent Existence (LOIE)
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Questions
?