15. Assumptions (2) - Demographic assumptions

Question 1

Main demographic assumptions

(vales assigned to parameters should reflect expected future experience of the lives who will take out the contract being priced)

Answer 1

• morbidity
• mortality
• lapse rates
• PMI incidence rates
• CI incidence rates
• LTCI incidence rates, transition probabilities

Question 2

Insured lives will depend on

Answer 2

• target market for the contract (distribution channel, territory chosen)
• underwriting controls
• claim controls
• policy wording
• expected change in experience since time of last historical investigation

Question 3

Factors by which to split long-term health and care products

Answer 3

• age
• gender
• smoker status
• occupation
• benefit size
• benefit type (lump sum/ income)
• product class (stand-alone, rider)
• individual/ groups
• distribution channel
• ## region (for group risks)
• duration since policy entry
• duration since start of current benefit
• underwriting status (accepted at standard terms or subject to special terms)

Question 4

Factors by which to split short-term health and care products

Answer 4

• age
• gender
• smoker status
• occupation
• income
• class of product (PMI, dental plan)
• cover option (basic, comprehensive)
• benefit level (level of excess)
• individual/ group
• distribution source (region)

Question 5

Key social and economic influences on adjustments made to product rates

Answer 5

• state benefits (government promises)
• economic situation (pessimism and levels of unemployment)
• inflation
• changing attitudes to health
• greater access to healthcare services
• better diagnosis of medical conditions
• availability of new medical technology

Question 6

Factors may cause future morbidity of new policyholders to differ from that of the company’s own historical experience data

Answer 6

• changes in target market
• changes in distribution channel
• changes in policy wording
• changes in the impact of medical advancement
• changes in regulation
• changes to economy
• changes in underwriting practice
• changes in targeted territories
• changes in claim control procedure

Question 7

Mortality rate assumptions are important for

Answer 7

• CIP under LTCI
• accelerated CI insurance
• within survival period for stand-alone CI insurance