The 3rd Younger Members Convention

1
The 3rd Younger Members Convention

• 29-30 November 2004, The Chesford Grange Hotel,
  Kenilworth

2
CI What are the Risks and How to Manage Them?

• Grigory Spivak, Gen Re LifeHealth UK

3
CI What are the Risks and How to Manage Them?

• Contents
• Underwriting and claims
• Future adverse trends
• Definitions
• Alternative product design

4
Benefits and needs

• Mortality term assurance
• Lump sum paid to dependants after death

• Critical Illness
• Lump sum paid upon diagnosis of a life-changing
  illness
• List of illnesses
• Definitions
• Underwriting, non-disclosure
• Claims management

5
Recent UK experience
Current UK position

• Increased number of covered conditions
• Weakening definitions
• Competition
• Standardisation
• Medical advances

• Some conditions dropped
• Angioplasty
• Diabetes
• Definitions tightened
• Myocardial infarction
• Prostate cancer
• TPD own

• Increased number of covered conditions
• Weakening definitions
• Competition
• Standardisation
• Medical advances

• Some conditions dropped
• Angioplasty
• Diabetes
• Definitions tightened
• Myocardial infarction
• Prostate cancer
• TPD own

6
Recent UK experience
Current UK position

• Poor underwriting
• Silo mentality
• Commercial decisions
• Short applications
• Increasing benefits levels
• Up to 5 million
• Business market boom

• More stringent underwriting
• Maximum ratings
• Certain disclosure declined
• Maximum benefits capped
• Could be 250,000 or 500,000

7
Recent UK experience
Current UK position

• Weakened underwriting position
• Genetics lobby
• Family history
• Smoking
• Obesity
• Claims control difficulties
• TPD
• Non-disclosure
• Sharp increase in premiums

• Duty of disclosure highlighted
• Longer application forms
• Ombudsman, explanations of definitions
• Reinsurers pulling out of the market

8
Claims management case study 1

• A woman made a 500,000 claim for breast cancer
  surgery. Details of the claim
• Histology report based on a sample tissue
• Company CMO confirmed a diagonal scar on her
  breast
• A woman was referred for a surgery by her husband
• Both she and her husband work in the hospital
• The claim was paid
• She also had 35K policy with another company
  which also paid
• One year later anonymous telephone call received
  by the insurer
• The tissue provided for testing was actually that
  of claimants mother
• Claimants husband performed surgery to provide
  physical evidence of scarring

9
Claims management case study 2

• A professional goalkeeper claimed under TPD Any
  condition
• He damaged his leg during a match and his current
  contract with a club he played for was
  terminated
• Several GPs reports stated that he was unable to
  gain employment in any capacity
• A few pages from the Internet showed that he
  joined another football team and even the details
  of the best save of the day by him during a
  match
• The claim was declined on grounds of attempted
  fraud

10
Potential adverse trends

• Diagnostics
• Screening
• NHS Capacity
• Treatments
• Legal Challenge

11
Angioplasty
Source British Heart Foundation
12
The Daily Telegraph 07/09/04

• One in five teenagers show signs of heart
  disease
• By David Derbyshire and Roger Highfield07/09/200
  4
• The couch potato way of life has become so
  common that one in five young teenagers suffers
  from the early signs of heart disease and stroke,
  a disturbing new study has found.
• Tests on children aged 11 to 14 showed 20 per
  cent with the sort of blood vessel damage
  normally associated with cardiovascular disease,
  regarded as the preserve of adults.
• Although the children would be unlikely to show
  symptoms until middle age, the study says poor
  diet and inactivity are having an impact on
  health far earlier than many doctors realised.

13
Definitions

• Catastrophe scenario is possible
• Crucial for both guaranteed and reviewable
• Definitions should be future proofed
• Plain English
• Robustness in 20 years Vs. Plain English

14
Definitions

• Definitions Guide
• Care with naming current diagnostic tests
• Severity condition within all definitions,
  objective and measurable
• Name of condition, e.g. Life Threatening Cancer
• Severity criteria
• Stroke Activities of Daily Living (ADLs)
• Heart Attack Injection Fraction

15
Catastrophe Scenario

• Leukaemia
• Micro-strokes and micro-infarctions
• Be very careful about definitions

16
Cancer current ABI definition

• Any malignant tumour characterised by the
  uncontrolled growth and
• spread of malignant cells and invasion of tissue.
  The term cancer includes
• leukaemia and Hodgkins disease but the following
  are excluded
• All tumours which are histologically described as
  pre-malignant, as non-invasive or as cancer in
  situ.
• All tumours of the prostate unless histologically
  classified as having a Gleason score greater than
  6 or having progressed to at least TNM
  classification T2N0M0.
• All forms of lymphoma in the presence of any
  Human Immunodeficiency Virus.
• Kaposi's sarcoma in the presence of any Human
  Immunodeficiency Virus.
• Any skin cancer other than invasive malignant
  melanoma.

17
Cancer definition - comments

• Excluding carcinoma in situ does not work as a
  severity criterion for non-solid cancers such as
  leukaemia and lymphoma.
• Leukaemia cannot be detected using histology.
  Leukaemia is often diagnosed initially on
  peripheral blood picture but cytology of bone
  marrow is usually obtained.
• A future very sensitive blood test could detect
  a few leukaemia cells in blood.

18
Cancer definition proposed

• The presence of a malignant tumour that is
  characterised by progressive, uncontrolled
  growth, spreading of malignant cells and invasion
  and destruction of normal and surrounding tissue.
  Cancer must be positively diagnosed with
  histopathological confirmation.
• The following tumours are excluded
• Leukaemia if there is no generalised
  dissemination of leukaemia cells in the
  blood-forming bone marrow or no anaemia in the
  peripheral blood.
• Chronic lymphocytic leukaemia less than RAI
  Stage 1 or Binet Stage A-I.
• Hodgkins disease and non Hodgkins lymphoma
  Stage 1 (Ann Arbor classification).

19
Cancer definition (continued)

• Tumours showing the malignant changes in
  carcinoma in situ (including cervical dysplasia
  CIN-1, CIN-2 and CIN-3) or which are
  histologically described as pre-malignant.
• All skins cancers, unless that is evidence of
  metastases or the tumour is a malignant melanoma
  greater than 1.5mm maximum thickness as
  determined by histological examination using the
  Breslow method.
• Prostrate cancers which are histologically
  described as having a Gleason score greater than
  6 or having progressed to at least TMN
  classification T2N0N0 or are of equivalent or
  lesser classification.
• Non life threatening cancers, such as papillary
  micro-carcinoma of the thyroid or bladder.

20
Plain English

• Speak English! said the Eaglet. I don't know
  the meaning of half those long words, and I don't
  believe you do either!
• Alice in Wonderland, by Lewis Caroll

21
How else can we manage risk?

• Reviewable
• Renewable
• But
• Treat customers fairly
• Financial Ombudsman unfair contract terms?

22
Alternative design options

• Severity criteria, rather than definitions
• ADLs, ADWs, Whole Body Impairment
• Sum assured differentials

23
Alternative design obstacles

• Fear of being different
• Cant be called Critical Illness
• Distribution channels

24
Positive trends

• Ban for smoking in public places
• Diagnosis of tumours at pre-cancerous stage
• Healthier eating, other healthy habits
• Statin drugs

25
Summary

• Underwriting and claims
• Trends positive and negative
• Definitions
• Alternative product design
• Any questions?