Flashcards in Lists Deck (65):
4 Health Cash
5 Major medical expenses
Policy conditions should aim to..
1 Intentions - reflect true office intentions
2 Cushion - give cushion against adverse events that can't be controlled
3 Be simple and unambiguous
Ways which overinsurance can arise from RR
1 From outset
2 Subsequent - salary doesn't keep up with benefits
3 Reduced tax on IP applying to EB
4 Multiple policies
5 Other non-disclosed income
Ways to address overinsurance from RR
1 Msx benefit formula
2 Train sales staff reducing incentive to overinsure
3 Regular review ensure appropriate RR
4 Clear policy conditions highlighting action at claims stage if over-insured
Occupation class multiples
1 = 100%
2 = 175%
3 = 300%
4 = 400%
Disability occupational definitions
1 Can't do own occupation
2 Own or any suited by education/training
4 Own for inital period e.g. 2 years then any
Possibile diability tests
4 PCA (personal capability ass)
Reasons to have a non-zero deferred period?
1 Integrate with employer benefits
2 Reduce cost of claims to insurer and price
3 Reduce admin costs and price
4 Meet true customer needs e.g. not want to submit claim if ill for 2 days with a cold
When can there be benefit escalation? How common?
1 Same rate in and out (most common)
2 Some out, none in (unusual)
3 Some in, no or lower out (common)
How can residence effect risk?
1 Living when underwritten
2 Living when disability occurs
3 Living when benefit payable
When is a CI paid?
In any of the following ways:
1 Upon an event, independent of extent
2 Reaching defined degree of impairment
3 Undergoing a surgical procedure
Characteristics of an illness making it appropriate for CI
1 Condition perceived by public to be serious or occur frequently
2 Each condition covered can be defined clearly with no ambiguity
3 Sufficient data to price it
List some major conditions (90% of claims)
2 Coronary artery by-pass surgery
3 Heart attack
4 Kidney failure
5 Major organ transplant
List other conditions (75% of policies include)
1 AIDS/HIV from bloody transfusion
2 AIDS/HIV from occupation
4 Aorta graft
5 Benign brain tumour
7 Heart valce replacement
8 Loss of limb
9 Loss of speech
10 Motor neurone disease
13 3rd degree burns
List conditions listed in CI policies that are there due to popular demand and competitiveness
2 Chronic empyhysema
4 Pre-senile dementia
5 Rheumatoid arthritis
Main types of disability definition for CI
1 Occupation based
2 Related to ADLs
3 Using working activities/functional assessments
List typical ADL's
Reasons to offer tiered benefits (payment linked to severity) for CI
1 Comprehensive - benefits offered at lower levels that full CI
2 Anti-selection reduced as payments match financial needs closer
3 Customer satisfaction and retention as multiple claims possible
4 Differentiation - from competition
5 Profits - comparisons more difficult so can make more profit
Areas of difficulty in offering CI tiered benefits?
1 Historic experience not enough for tiers
2 Frequent changing of underlying incidence and transitions before own-experience emerges
3 Overlaps between related illnesses makes pricing difficult and policyholder confused
4 Defintions of stages of benefits that are legal and medically objective and understandable to a consumer are difficult
5 Risks mean high margins, low guarantees and cooperation with reinsurers
6 Non-disclosure of medical condtions becomes even more significant
7 More claims forms
How do tiered benefits meet customer needs?
1 Closer to medical distress and financial needs
2 More comprehensive and fairer
3 Depends on whether policholder pays less/more/same for standard policy covering same conditions
4 Complexity and lack of comparable products means less appeal to prospective p/h and advisors
5 Potential for high degree of claims disputes
3 types of benefit from comperehensive PMI
1 Hospital costs
2 Specialist fees
3 Other features
Name 8 hospital costs
2 bursing care
Day care with no overnight stay
6 operating theatre
7 diagnostic procedures
8 Acommodation for 1 parent to stay in hospital with insured dependent child under 12
Name 8 specialist fees
Surgeon fees for in-patient and day care ops
Physicial fees for in-patients
Out patient treatment:
Name 3 other features to PMI
1 Private ambulance
2 Recuperative care e.g. nursing immediately following in-patient surgical treatment covered
3 Maximum overall limit
4 inclusions in a standard policy
3 In-patient tests
4 Hospital accomodation
4 sometimes included in a standard policy
1 Out-patient tests
2 Out-patient consulations with specialist
3 Overseas cover
4 Cash payments for treatment received as in-patient on state healthcare
4 usually not included on standard PMI
1 pre-existing conditions
2 GP services
3 Long-term illness cover that can't be cured (chronic)
4 A&E treatment
8 exclusions to PMI
1 Drug abuse
3 Normal pregnancy
4 Sex change
5 Experimental drugs
6 Experimental treatement
7 War risks
8 Hazardous pursuits
What principal dental plan methods are there?
1 Capitation basis - insurer and dentist agree sum per year per mouth insured
2 Indemnity basis - insurer covers annual cost of treatment
How to split types of cost of care, give 3 examples each
1 Living costs e.g food/clothing/heating
2 Housing costs e.g. rent/mortgage/council tax
3 Personal care e.g. additional costs to be looked after arising from disability
Methods of funding insurance premiums in LTC?
1 Single prem
2 Regular prem
3 Restricted reg prem stopping at a) age b) defined disability level
4 Retrospective e.g. equity release
Additional options in group IP above salary cover?
Employee/employer pension contribution
Employee/employer state welfare contributions
Key requirements to establish group CI scheme?
1 A definition of who is eligible for benefits under scheme
2 Benefits are clearly defined by size/deinition of valid claim/period of benefit (if applicable)
Considerations for group PMI?
1 Benefit and exclusion similar to individual
2 Pre existing more likely due to lower anti-selection degree
3 Greater scope for customising benefits for larger groups to meet their requirements
Objectives of state healthcare?
1 Protect nation's health
2 Subsidise the poor
3 Balance the budget
4 Follow social culture/political promises
How do state and commercial insurance co-exist?
1 Insurance as an optional alternative
2 Insurance as an optional complement
3 Insurance as a compulsory alternative
4 Insurance as a compulsory complement
What is an alternative/complement
Alternative = state insures a comprehensive amount, companies can offer better
Complement = state insures limited range, individual funds the rest
How might state benefits be flat and earnings related?
1 Salary related rewards those who have contributed more in tax to reflect their higher financial responsiblity
2 Flat provides incentive to return to work, minimises cost on state and encourages taking out insurance
How might a state fund welfare expenditure?
one or a mixture of:
2 Forward funding
List incentives for self-provision?
1 Tax relief on premiums for appropraite insurance
2 Exclude some or all of population from national welfare scheme
3 Reduce general tax where appropraite insurance taken out
4 Subsidise providers to reduce cost of private insurance
Things that need to be taken into account if using external data to price?
1 Approach to underwriting and acceptance
2 Policy conditions
3 Claims management
4 Distribution methods and channels
5 Target market
Drawbacks of using population data?
1 National experience not same as insured lives
2 Definitions of 'claim' under the policy not easily got from population data e.g. National stats may count disability as not ADL related
3 Availability not electronic or in correct format
4 Out if data
Drawbacks of formula approach
1 Doesn't allow for proper timing of events
2 ..for accumulation of reserves
3 ..for impact of net negative Cashflows in any period
4 ..variation of assumptions over time
5 ..for capital needs
6 ..separation of premium and claim related cashflows
Contribution to stat reserves/solvency capital
Interest on Cashflows and reserves
Give various stages of HSD model
Healthy paying premiums
Sick and in deferred period
Sick and in claim
Recovering reverting to premium paying
What 3 tables for CMIR12 are in S(ID)?
1 Claim inception rates
2 PV of current claim sickness annuities
3 PV annuities during sickness for lives currently healthy
What options are available on policies?
1 Additional cover without further health evidence, at normal premium rates on date of exercise
2 Renew long term policy at end of term e.g. CI without further health evidence
3 Reinstate mortality cover after accelerated plan pays out on sickness
What extra assumptions in pricing basis are there for valuing mortality/morbidity option?
1 Probability option exercised
2 Expected mortality/morbidity of lives who exercise
How can reinsurance help in management of product development and profitability?
Technical assistance in data and pricing basis
Risk sharing, limit overall exposure
Financial support for NB strain
Tax arbitrage if taxed differently
Solvency capital arbitrage
Enable acceptance of larger risks
Specific healthcare model features
1 Allows for all Cashflows including premiums/benefits/options/guarantees
2 Allow for Cashflows relating to supervisory reserving requirements and solvency capital requirements
3 Project separately Cashflows arising from HSD states and allow for transitions
4 Allow for interactions especially if A and L modelled together
5 Allow for use of stochastic models and simulation e.g. Distribution if claims outgo
What should a discount rate take into account?
1 Required return by company
2 Level of statistical risk on Cashflows in contract
When marketability is considered, what might be changed?
1 Design - remove (reduce risk) or add (differentiate product) features
2 Distribution channel - same marketability but different assumptions and resulting premium/profit
3 Profit requirement
4 Proceed or not with marketing the product
Key features of deterministic model
1 Each parameter fixed
2 Point estimate results
3 Sensitivity test by running mode with different parameters
Features of stochastic model?
1 Some parameters vary and have own distributions
2 Model run many times using random sample of distribution functions
3 Results are in form of probability distribution
What to estimate in PMI?
1 distribution claim frequency
2 distribution if claim amount
3 impact of sales tax on growth
What's it necessary to estimate in LTCI?
Distribution of claim frequency
Distribution of claim amount
What is it necessary to estimate in IP?
What is it necessary to estimate in CI?
Many (up to 40) different distributions if wanted one for each condition
Allowance for future trends
Data limitations for modelling PMI/LTC/IP/CI
All - absence of insurance statistics
1 family cover where company doesn't have data on all of family
2 group data has same problem
1 insurance stats absence
1 Published statistics have limited credibility
2 Large amount if statistics, especially from USA, but may not be relevant
1 only cancer and heart attack last data has enough volume
How might PMI modelling be complicated?
1 model macro economy, government style, level of competition
2 NCD muti states
3 Multiple renewal costs
4 Modelling gp referral-specialist-hospital-settlement delay
Hiw might modelling be difficult in CI?
1 Separate modelling for disease or treatment based
2 Guarantees and options
How might modelling be difficult for LTC?
Modelling medical advances and care inflation
How might modelling in IP be made difficult?
HSD multi state model difficult
Guarantees and reviewable alternatives
Other things that may make modelling difficult
1 Role of genetics
2 Trends in anti selection
3 Quality of underwriting