Critical Illness Working Party

1

• Critical Illness Working Party
• Neil Guinan (Chair)
• Gareth Colgan
• Jeff Davies
• Alan Grant
• Tony Jeffery
• Steve Payne
• Dave Roberts

2
Content

• Introduction
• Approach
• Analysis of Data
• Declined Claims Study
• Reserving Survey
• What Next?

3
Introduction

• Who we are
• What we are doing
• Terms of reference
• Compare with relevant tables
• Analyse for trends
• Determine if to publish assured lives table
• (If so, produce it)
• Declined claims
• Survey current reserving bases
• Make recommendations

4
History

• Number of new critical illness policies sold in
  Republic of Ireland

5
History

• Number of new critical illness policies sold in
  Republic of Ireland and UK

6
History

• Product history in Ireland as established as the
  UK
• 16 of population between 20 and 50 covered
• IC94 origins
• introduction of guaranteed rate contracts
  required a valuation basis

7
Approach

• Use of CMI through Society of Actuaries
• Sought support of Offices and Sponsors
• Most offices not CMI members
• Agreed framework

8
Participants and Sponsors

• Participants
• Acorn Life
• Canada Life
• Eagle Star
• Friends First
• Hibernian (Norwich)
• Irish Life (Irish Progressive)
• Lifetime
• New Ireland
• Standard Life

• Sponsors
• Ark Life
• Caledonian Life
• Scottish Provident
• GE Frankona
• General Cologne Re
• Gerling Global Re
• Munich Re
• Swiss Re

9
Basis of Study

• Data owned by the Society
• Safeguards / Confidentiality
• Levels of output
• Participants
• Sponsors
• Everyone else

10
Scope of Analysis

• Years covered
• 1995 to 1999 initially
• Ongoing into the future
• Size of this investigation versus other
  investigations
• 235,000 lives in 1999 data
• 1,750 claims during the investigation period
• Subdivision of data

11
Issues / Caveats

• Different benefits and changing products
• Treatment of TPD
• Treatment of rated lives
• Treatment of duplicate lives
• Dates used for claim information

12
Lives in force at 31/12/1999

• Total Lives 235,000
• Male 60
• Female 40
• Non Smoker 72
• Smoker 26
• Undifferentiated 2
• Accelerated 48
• Stand Alone 52

13
Distribution Channel
14
Age Distribution
15
Split by Duration
16
Declined Claims

• Investigation in isolation
• Tie in with exposure
• Office practice - what counts in the data?

17
Reserving Survey - 2000

• Method
• Discounted cash flow 9
• Net Premium 5
• Base table
• IC94 9
• Reinsurer rates 3
• Policyholder rates 1

18
Reserving Survey - 2000

• Margins for offices using IC94
• of table ranges from 110 to 150
• Median base 135
• Deterioration ranges from 1 to 3
• Median deterioration 2 p.a.
• Margins for other offices
• Typically 100 of base table with no deterioration

19
What Next?

• We would like your input
• Apart from the experience what is to be done?

20
Key Issue 1 New TableReasons for an Assured
Life table

• Need for a benchmark
• Likely better shape
• Immature experience could be misleading
• Data so far grouped duration 0,1, and 2, - now
  changing.
• Conditions vary company to company
• IC94 shows that tables WILL be used!
• Is this good or bad?

21
Key Issue 1 New TableReasons to stick to
population table

• Unbiased by insurer
• Larger data base
• Tables could be out of date very quickly
• Difficult to adjust for lots of reasons
• Definition differences to data
• First incidence a principle of insurance
• Effect of selection ( and -)
• Socio - economic differences between assured and
  population.

22
Key Issue 2 Should we recommend Valuation Basis?

• Statutory Solvency
• Initial Level
• Deterioration factor
• By Product Type
• FCR
• IAS

23
What other issues can we contribute to?

• How can we look at data to influence future
  contract design?
• Should we? - balance of interests?
• What trends should we look at?
• By duration
• By year of issue
• By illness
• Medical advances
• Genetics
• Behavioral changes
• Lives v amounts

24
What other issues can we contribute to?

• Our three issues
• Valuation Table
• Reserving bases
• Product Design
• There must be others