Chapter 6 Flashcards
What is CI in the context of health and care insurance?
CI is a pure protection product where the benefit is typically a lump sum payable if the policyholder suffers one of the defined conditions during the contract term.
What are the conditions under which regular premiums for CI are paid?
Regular premiums are paid until:
* Insured event occurs
* Insured dies
* Term of the policy ends.
How can a lump sum from a CI policy be utilized?
The lump sum can be converted into an income or the policy may be structured to provide an income with any outstanding amount payable on death.
What are the advantages of paying CI benefit as a regular income instead of a lump sum?
o Can help claimant to manage finances better + can reduce potential fraudulent claims
▪ PH less likely to attempt fraud if receive small, regular amounts rather than lump sum
▪ More opportunities to identify fraudulent claims, e.g. identify PHs who have made
unusual recoveries
In which forms are CI policies provided?
- Stan-alone CI insurance
- Rider benefit to a life policy
- Accelerated CI insurance
What is a stand-alone CI insurance?
A stand-alone CI insurance pays the sum insured only on the diagnosis of an insured condition and no payment is made on death.
What is a rider benefit in the context of CI?
A rider benefit to a life policy pays the sum assured relating to CI on diagnosis of CI and the sum assured relating to death benefit upon the death of the life insured.
What is accelerated CI insurance?
Accelerated CI insurance pays the sum assured on earlier diagnosis of CI or death.
True or False: CI policies are direct substitutes for Income Protection (IP) policies.
False.
What are the key features of CI insurance?
CI insurance benefits are payable:
* Upon the happening of a CI event
* On reaching a defined degree of impairment
* On undergoing a surgical procedure.
What is the difference between CI and IP?
CI provides cash benefits rather than an indemnity for the policyholder, while IP provides regular income until the insured returns to work or the policy term ends.
True or False? A CI policy provides a SV and maturity benefit.
False. However, if PH survives to end term without making claim, some insurers will include product feature
that allows policy to be reinstated without further health evidence
What are some needs that a CI policy can meet?
CI policies can fund:
* A change of lifestyle
* Income via an annuity
* Repayment of a mortgage or loan
* Medical costs for surgery or treatment
* Other needs met:
- Recuperation after illness
- Tax planning
- Medical aids
* Keyman cover
How does CI attempt to overcome some of complexity of other health related products?
Fixed sum insured on certain pre-defined events
What are the main aspects to simplicity of CI insurance product?
- Lump sum payout - cannot be withdrawn by insurer
- Claims trigger of diagnosis or procedure is easy to explain to PH
Ease of understanding the claim conditions for PHs are hampered by:
- Different definitions for critical conditions between insurers in same market which can complicate claims acceptance
- More severe requirements on condition covered than informal understanding of term used in headline title of condition.
- Exclusions & point-of-claim underwriting.
What are the characteristics of insurable conditions under a CI policy?
● Can be defined clearly so that ambiguity at the time of claim is avoided.
● Ability to avoid anti-selection.
o Counter with effective underwriting.
o Use moratorium period to exclude certain conditions for an initial period.
● Perceived by public to be serious and to occur frequently
o To be included, an illness, if not life threatening, should at least be lifestyle threatening
o Ideally illnesses should not be so rare that there’s negligible risk of occurrence
● Sufficient data available to price benefit accurately
What is keyman cover in CI?
Keyman cover allows business partners to purchase CI policies on each other’s lives to fund a buyout of a stake in the partnership when CI arises.
What is a terminal illness benefit in CI?
A terminal illness benefit ensures that conditions significantly reducing life expectancy are covered and can accelerate payment of death benefits.
What is a children’s benefit in CI?
A children’s benefit rider provides cover for the life of the insured’s children, with claims not terminating the policy.
List some major/core conditions typically covered in CI policies.
- Cancer
- Heart attack
- Stroke
- Kidney failure
- Major organ transplant.
What are tiered benefits in CI?
Tiered benefits link payment of benefit to the severity of the disease, with further claims possible if the disease advances.
True or False? Premiums under a tiered benefit CI policy reduce with proportionate payment.
False.
What are the reasons for offering tiered benefits?
- More comprehensive
- Potentially a closer fit to the medical distress and financial needs
- Multiple claims are possible
- Might allow insurers to differentiate products from competitors
