Chapter 1: PMI and other health-related products

Question 1

Explain the difference betweenindividual risk ratingandcommunity rating

Answer 1

Individual risk rating: insurer charges premiums to policyholders based on their risk profile

Community rating: insurer charges the same premium to all policyholders that belong to a group (may be based on residence/ occupation, no underwriting at individual level)

Question 2

Outline the difference between the principles of mutuality and solidarity

Answer 2

mutuality: premium commensurate with the level of individual risk posed

solidarity: premiums depend on factors other than individual risk such as ability to pay and cover is granted based on need

Question 3

What is the difference betweenin-patientandout-patienttreatment?

Answer 3

In-patient treatment generally involves the patient staying in hospital overnight

Out-patient treatment generally involves the patient receiving treatment during day visits to the hospital

Question 4

Discuss PMI

Answer 4

Indemnity-based product that seeks to indemnify (main member and dependents) against the cost of private medical treatment
It is short-term and is usually renewable annually

Policy may typically cover emergency medical treatment, and in-patient treatment
Out-patient treatment may be covered subject to benefit limitations

in-hospital benefits PMI:
types of admissions covered - rand amount pa limit/ consider co-payments and exclusions

out-of-hospital benefits PMI:
chronic medication - conditions covered/ rand amount pa limit,
OTC medication - types of medication covered/ rand amount pa limit, GP visits - co-payments/ number of covered visits pa,
specialist visits - referral needed/ number of covered visits pa

Day-to-day medical expenses:
(OTC medication, GP and specialist consultations) can be self-funded by the policyholder through a medical savings account

Important factors for pricing PMI:
age, chronic status, occupation, gender, smoker status

General exclusions:
alcohol and drug abuse, self-inflicted injuries, cosmetic surgery

Question 5

List and briefly describe theother health-related products (MME, health cash plans, waiting list plan)in addition to PMI

Answer 5

MME:
Provides alump sum benefit for specified surgical procedures
lump sum benefit varies with the class and severity of the procedure
lump sum benefit is estimated to be enough to cover in-patient treatment with a balance for recuperation expenses

Health cash plans:
defined-benefit defined-premium products
waiting period often applies
cash benefit is generally small relative to the full cost of indemnity - reduces the risk of adverse selection
eg hospital cash plan/ gap cover

Waiting list plan:
If the policyholder cannot find free public healthcare within a specified time period and within a reasonable radius of residence,
the policy will indemnify the policyholder against the cost of private medical treatment
in other words the policy operates as a normal comprehensive PMI policy

Question 6

Describe health benefits in travel insurance policies

Answer 6

Cover foremergency medical treatment overseas,
including medical evacuation (immediate medical treatment needed at time of injury) and repatriation (extended medical treatment after injury)

There is usually a benefit limit per trip, with policyholders selecting the benefit limit that is most appropriate to them

rating factors includeage, gender, destination, length and type of trip

Question 7

Explain personal accident policies and discuss the “total permanent disability” benefit

Answer 7

short-term policies that provide lump sum benefits (can be large) to compensate for bodily injury suffered as the result of an accident

cover for total permanent disability (TPD) as a result of an accident is often included:
advisable to use deferred period when difficult to establish if disability is permanent initially
“Permanent”can mean no hope of recovery in your lifetime
“Total”usually means unable to perform a major or substantial part of the job or function

Question 8

Describeoccupations-based definitions

Answer 8

Disability established by the inability to carry out an occupation:

their own occupation
all occupations to which suited by education, training or experience
any occupation

Question 9

Describeactivities of daily living definitions

Answer 9

Disability established by the failure to undertake, unaided, a given number of ADLs:

It can be applied to a wider range of lives(housewives, unemployed),and can be applied beyond retirement
more objective than occupation-based definitions

Question 10

List 6 ADLs

Answer 10

feeding
dressing
washing
toileting
mobility
transferring