CH:7 Health insurance products

Question 1

What are the key features of short-term health contracts

4

Answer 1

• Cover is typically provides for a single year and can be renewed
• Can be multiple claims
• Claim amouns are generally unknown and can be volatile
• There can be delays in reporting and settling claims

Question 2

What are the key features of long-term health products

5

Answer 2

• They are long-term (eg 20 years)
• Cover usually ceases on claim
• The claim amount may be known with certainty (eg fixed sum assured)
• They are used for protection against ill health or death as well as savings
• Group versions are typically only for 1 or 2 years but can be renewed

Question 3

Main types of healthcare products

(4)

Answer 3

* Private medical insurance- benefits provide for cover of medical expenses incurred or access to healthcare benefits
* Critical illness - beenfits provide for a sum assured to be paid
* Long-term care - benefits provide for custodial care
* Other products and cash benefits- usually offer some benefit (possibly a cash amount) contigent of occurence of a health event

Question 4

Aspects to consider in product design (Healthcare)

Answer 4

• Customer acceptability
• Regulatory requirements
• Price competitiveness
• System capabilities

Question 5

How can medical expenses cover be limited under Private Medical Insurance?

Answer 5

PMI products will vary according to:

• Overall financial limits and/or sub-limits
• The level of the reimbursement rate for specific healthcare services
• Whether the limit covered services to a network of healthcare providers
• Whether to provide out-of-service hospital benefits
• Whether to include medical savings accounts
• Benefits required by legislation
• Risk transfer mechanisms

Question 6

Why may short-term insurers require reinsurance?

Answer 6

• They need to protect against large claims
• They will be able to take on larger risks and more risks than they otherwise could, due to capital constraints.
• They can reduce the impact of accumulations of risk and catastrophes

Question 7

Difference between indemnity cover and stated benefit cover for health events?

Answer 7

• Indemnity cover provides benefits related to the loss incured on the occurence of a health event
• Stated benefit cover, the policy documents defines the benefit that is payable regardless of the actual loss incurred

Question 8

What are the 4 types of entities involved in the provision of healthcare services and health insurance

Answer 8

• state provision and national insurance
• subsidised healthcare through donor organisations
• mutual organisations (medical schemes)
• insurance companies

Question 9

List the risks to healthcare providers

10

Answer 9

• claim frequency, benefit amount, volatility and settlement delays
• accumulation of risk, castastrophes, and large number of claims
• investments risk eg. poor or volatile returns
• expenses being higher than expected
• poor persistency
• poor plan mix
• underwriting risk
• credit risk eg. failure of counterparty such as provider
• operational risk eg. fraud, systems failure
• availablility of claims data