Ch6: CI

Question 1

When is a benefit payable under CI?

Answer 1

• upon the happening of a CI event
• on reaching a defined degree of impairment
• on undergoing a surgical procedure

Question 2

Needs met by CI policy

Answer 2

• income can be provided by purchasing annuity with lump sum
• repay mortgage or other loan
• fund medical costs
• business partners can purchase CI policies on the lives of each other (buy out their stake)
• change in lifestyle can be funded
• recuperation after illness, taxation planning

Question 3

Ease of understanding of conditions hampered by

Answer 3

• different definitions of CI between insurers in the same market
• more severe conditions on the condition covered than the colloquial understanding of the term used in the headline title of the condition

Question 4

Characteristics of insurable conditions

Answer 4

• it is a condition perceived by the public to be serious and to occur frequently
• each condition covered can be defined clearly so that there is no ambiguity at the time of the claim
• sufficient data available to price the benefit
• ability to avoid anti-selection

Question 5

Major critical illnesses

Answer 5

• heart attack
• cancer
• stroke
• coronary artery bypass surgery
• kidney failure
• major organ transplant
• MS

Question 6

Core conditions in SA

Answer 6

• heart attack
• cancer
• stroke
• coronary artery by-pass graft (CABG)

Question 7

Why offer tiered benefits?

Answer 7

• more comprehensive benefit
• matches medical distress/financial need more closely, thereby reducing incentive for anti-selection and for exaggeration of symptoms at claims stage
• multiple claims are possible which enhances policyholder satisfaction and retention
• permits insurer to differentiate itself from its competitors
• it makes comparisons more difficult

Question 8

Definitions of disability

Answer 8

• occupation-based
• related to ADLs
• definitions using working activities or functional abilities