Chapter 1 Flashcards
Overview of benefits
Challenges in provision of benefits
Demographic issues
New technologies
Information asymmetry and behavioural biases
Limited resources (budgetary or supple constraints)
List demographic issues
Longevity
Burden of disease
Health and care insurance products
Private medical insurance (PMI)
Health cash plan
Major medical expense (MME) plan
Critical illness (CI) insurance
Long-term care insurance (LTCI)
What is private medical insurance (PMI)?
An indemnity-based product that seeks to provide compensation for the cost of private medical treatment.
What is health cash plan?
Health cash plans pay the policyholder a fixed amount per benefit event.
What is major medical expense (MME) plans?
A lump sum benefit that is estimated to cover the cost of treatment.
Common features of PMI, health cash plans and MME plans?
Short term, but can be reviewed
Make provision for multiple claims
Claim amounts can be unpredictable and may fluctuate
What is critical illness (CI) cover?
A protection product that provides benefits if the policyholder suffers specific conditions covered by the policy.
What is long-term care insurance (LTCI)?
A product designed to meet the costs of long-term care for individuals whose health is unlikely to improve. Long-term care includes all forms of continuing personal or nursing care and associated domestic services for people who cannot look after themselves without some support.
It can be on an indemnity or cash basis
Prefunded vs immediate meed LTCI
Prefunded LTCI: protect individual against increased costs should they require long-term care in the future. It’s a combination of a savings and a protection product.
Immediate-needs LTCI is purchased by someone who needs long-term care right away but is uncertain of their future lifetime. It’s a protection product.
The organisation establishing the benefit arrangement is called the…
sponsor (example: state, religious organisation, trade union, fsp or employer)
Name 3 things sponsors are usually interested in ensuring that benefit arrangements are.
Provides benefits whose form and level are appropriate to beneficiaries’ needs.
Provides benefits at an affordable and sustainable level of cost.
Provide benefits that are consistent with the sponsor’s other objectives.
What is Defined contribution (DC) funds?
Retirement schemes that pay benefits to a member that are equal to the member’s accumulated contributions, plus the investment returns earned on those contributions, less any expenses.
What is Defined benefit (DB) funds?
A scheme that pay benefits that are known, which are perhaps determined by a formula, with varying contributions.
How is profit shared and distributed in a mutual insurer vs proprietary insurer?
In a mutual insurer, profits are shared in varying proportions between classes of policyholders.
In a proprietary insurer, profits are shared between shareholders and certain classes of policyholders.
