Critical Illness Insurance NOW is the Time

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Critical Illness Insurance NOW is the Time!

• Mary Grahovac, ACS
• Regional Vice President
• Protective Life Insurance Company
• R. J. (Bob) Ley, RHU
• Vice President, AH Sales
• AIG American General

PLAG.2789.02.06
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Not because you are going to die, but because
you are going to survive! Dr. Marius Barnard
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Surviving Critical Illness

• We all know someone who has survived
• Cancera Heart Attacka Stroke.
• But what was the financial impact on their family?

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There is a solution to help prevent a critical
illness from becoming a financial catastrophe and
destroying lives.
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Historical Perspective

• South Africa 1983
• Asia Late 1980s
• United Kingdom 1987
• Australia 1990
• Japan - 1993
• Canada - 1995

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• Critical Illness was only accepted by 3 of the
  producer market in England 10 years ago. Now it
  is promoted by 99 of the same market.
• Peter Dodd
• Pegasus Life
• London, England November 1999

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Did You Know

• In the next four minutes
• Nine Americans will have a heart attack.
• Five Americans will have a stroke.
• Ten people in the United States will be diagnosed
  with cancer.
• Five American families will be forced to declare
  bankruptcy because of a medically related
  financial hardship.

Sources www.mercola.com-bankruptcy information
American Cancer Society
(www.cancer.org) - cancer information
American Heart Association (www.americanheart.o
rg) heart attack and stroke information

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Did You Know

• Every 45 seconds, someone will have a stroke.
  This number 3 killer is the leading cause of
  severe, long-term disability.
• The leading cause of disease in women is
  cardiovascular disease, more than cancer, and
  only 13 of women consider cardiovascular disease
  their greatest risk. And, 40,000 more women than
  men have a stroke annually.
• In 2000, 9.6 million Americans were alive having
  survived a history of cancer.

Sources Heart Disease and Stroke Statistics
2005 Update American Heart Association. Dallas,
Texas. 2005. Heart Disease and
Stroke Statistics 2004 Update American Heart
Association. Dallas, Texas. 2004.
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Did You Know

• Approximately 1.7 million Americans suffer a
  heart attack each year. Of these individuals, 1.2
  million will survive at least 3 years 75 are
  under the age of 47!1
• The survival rate for cancer patients is 73
  today.2
• A person who has a heart attack at age 45 has a
  57 chance of surviving for 5 years or longer.2

1 Source National Center for Health
Statistics/OptimumRe 2 Source American Cancer
Society and American Heart Association/OptimumRe

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Are you prepared inthe event of a critical
illness?

• According to the U. S. Department of Housing and
  Urban Development, 50 of home foreclosures are
  the result of the homeowner suffering from a
  critical illness.
• American Heart Association estimates Americans
  paid about 368 billion in 2004 for heart disease
  related medical costs and disability.
• Research shows 33 of all families deplete all or
  most of their savings because of a serious
  illness.

Sources LIMRAs Marketfacts Spring 2002
Critical Illness Insurance A Lump-Sum Review
Know the Facts, Get the Stats
American Heart Association 2002-2004.
(55-0576).2003
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The Cost of Survival

• Expenses usually covered by healthcare
  insurance
• Surgery
• Hospitalization
• Prescription Medications
• Doctors Office Visits

• Expenses not usually covered by healthcare
  plans
• Experimental Treatment
• Childcare, Housekeeping
• Transportation Lodging
  During Treatment for Family
• Home or Auto Modifications
• Home Healthcare Needs
• Lost Income

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Product Designs

• Stand Alone
• Critical Illness product built on a health
  chassis
• Acceleration
• A Critical Illness rider added to a life chassis
  product

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Product Designs

• First Generation
• Lump sum benefit paid upon first occurrence and
  diagnosis of a covered critical illness policy
  lapses following payment
• Second Generation
• Lump sum benefit paid upon first occurrence and
  diagnosis of a covered critical illness policy
  remains in-force to pay subsequent benefits

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Product Designs

• Subsequent Benefits
• Additional benefit payment for a subsequent first
  occurrence and diagnosis of an additional covered
  critical illness
• Additional benefit payment for second occurrence
  of critical illness for which a benefit has
  already been paid

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Product Strategies

• Fully Underwritten
• Generally benefit amounts up to 500,000
• Simplified Issue
• Generally worksite products with lower benefit
  amounts usually up to 100,000
• Guarantee Issue
• Group Chassis generally benefit amounts of
  5,000 to 20,000

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Critical Illnesses Covered by Various Carriers

• Heart Attack
• Coronary By-Pass
• Angioplasty
• Invasive Cancer
• Cancer in Situ
• Stroke
• End Stage Renal Failure
• Major Organ Transplant
• Coma
• Aortic Surgery

• Severe Burns
• Blindness
• Deafness
• Paralysis
• Advanced Alzheimers Disease
• Loss of Independent Living
• Multiple Sclerosis
• Motor Neuron Disease
• Benign Brain Tumor
• Heart Valve Surgery

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Product Differentiators

• Benefit Extension Riders
• Continuance
• Recurrence
• Multiple Payment Benefit
• Benefits for Spouse/Children
• Return of Premium Upon Death
• Best Doctors

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Underwriting Critical Illness Insurance

• Remember incidence occurs before mortality
• Morbidity based underwriting versus mortality
  based underwriting
• For example, in assessing coronary risk, there is
  a higher occurrence for the event of either a
  heart attack or coronary bypass surgery than the
  probability of dying from either one of these.

Source OptimumRe
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Underwriting Critical Illness Insurance

• Family history typically has a greater impact on
  CI underwriting than life underwriting. Variables
  associated with family (natural parents and
  siblings) history include
• The number of affected first degree relatives
  (FDR)
• The FDRs age at diagnosis not death
• The current age of the applicant
• The sex of the applicant (in some cases)

Source OptimumRe
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Potential Impact of Family History on CII
Less Impact
Greater Impact
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Underwriting Critical Illness Insurance

• Build is an important factor in critical illness
  underwriting obesity is a major contributor to
  cancer and heart disease
• Generally, APSs will be ordered more frequently
  on CI applications
• Typically the best candidates for standard CI
  underwriting would be the those individuals
  eligible to qualify for Select Preferred or
  Preferred life underwriting

Source OptimumRe
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Selling Critical Illness Whos a Prospect?

• Business Market
• Key Person
• Buy-Sell
• Worksite/PRD
• Professionals/Highly Compensated maxed-out on
  personal DI protection
• Singles, Single Parents
• Family Market one or both spouses employed

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Selling Critical Illness Whos a Prospect?

• Alternative to DI to those who cant qualify for
  traditional product
• Stay-at-home Moms/Dads
• Truckers, Barbers, Work out of home
• Assets under management protection
• Mortgage Market
• Only 3 of Mortgage foreclosures are due to death1

Source 1 Ken Smith, Assurity Life
President, National Association for Critical
Illness Insurance
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Consumer Focus Groups

• Reinsurance Companies conducted consumer focus
  groups to get input on the concept of CI
  insurance protection
• They found these participants to be among the
  most enthusiastic of any focus groups ever
  conducted on any insurance product

Source Ken Smith, Assurity Life
President, National Association for Critical
Illness Insurance
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The Gap Between What ProducersOffer and What
Clients Want
Currently obtain from advisor
Would like to discuss with advisor
Source Fidelity Advisor 2006 Survey of Investors
at Retirement McKinsey Company 2006 Consumer
Retirement Survey
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Effective and Compelling Marketing - Consumers

• Focus on the need for CII -
• They dont already have it
• Its hard to self-fund
• Health insurance isnt full coverage
• They are financially ill-prepared
• Communicate what the product is and what the
  product is not

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Issues and Concerns

• Education/Awareness by both producers and
  consumers
• Evolving Medical Technology
• Future of US Health Care

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The Future?

• Embedded benefits, Optional riders
• Product Evolutions
• More triggers
• Unique payouts
• Conversion options
• Packaging
• Mortgage, DI, LTC
• More carriers entering the market with ongoing
  product development

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Critical Illness Insurance NOW is the Time!
PLAG.2789.02.06