Chapter 6 - consumer interests Flashcards
Factors relating to product design that may affect the level of customer attraction and clarity arising from a particular product
- meeting specific needs
- providing cash
- providing peace of mind
- simplicity and clarity
- guarantees vs reviewable premium s and benefits
What makes a product attractive
- meet needs
- clear in purpose
- charging structure that the customer finds appropriate (e.g. addition of options and guarantees)
- affordable premium levels
Needs that healthcare insurance products meet?
- Can finance medical treatment bills
- Can provide funds to finance the cost of lifestyle adjustments following critical illness
- Can finance the cost of care in old age
- Can provide a lump sum benefit which can be used to repay loans
PMI: main needs met when State does provide some level of healthcare
Higher level of care such as:
- medical attention without waiting
- medical attention in a higher standard of accommodation
- medical attention with a doctor of choice
- medical attention in a local hospital
How can health insurers, managed care organisations, employers and the government foster the alignment of interests between the consumer and healthcare provider?
- setting treatment standards will ensure a minimum level of quality
- establishing treatment protocols where specific treatment is defined for a particular diagnosis
- establishing fee schedules for particular treatments.
Needs met by CI
- income can be provided from the lump sum via an annuity when the individual cannot work as a result of his/her critical illness
- The benefit can be designed to repay a mortgage or other loan when the policyholder is diagnosed with a critical illness
- Medical costs can be funded when the illness requires surgery or other expensive treatment
- Business partners can purchase CI policies on the lives of each other such that the benefits will fund the buyout of the stake in the partnership when CI arises
- A change in lifestyle can be funded when necessary to improve a claimant’s health
- Other needs include recuperation or rehabilitation treatment after illness, taxation planning, medical aids
Advantages of CI tiered benefits
linked to the severity of the disease
- may be a closer fit to medical distress and financial needs
- may be deemed more comprehensive and fairer (benefits will be paid for less severe conditions that may not have been eligible for claim under a standard CI contract)
Needs met by LTCI
- Provision of some financial protection against the costs of care and assistance when a person becomes unable to look after themselves.
(there may be uncertainty as to the role of the State in the future in paying for care) - There may be a need for medical care when physical breakdown requires the intervention and supervision of doctors and nursing staff
Microinsurance
- targeted at those who are working, but with low incomes
- designed to meet needs similar to those above, but with greater emphasis on more basic components and affordability
PMI plans that provide cash benefits
- hospital cash plan
- other health cash plans for specified medical events e.g. dental treatment
- major medical expenses
- accident, death and disability plans
Simplicity and clarity - PMI
Concept of PMI is clear and simple
- Underwriting and acceptance process and waiting periods can be misunderstood (can vary by market and insurer)
- Policy conditions (limits and excesses can further confuse. Plans are seldom identical across the market. Treatment for chronic, pre-existing conditions and treatment designed to improve lifestyle would usually be excluded)
- Cost sharing (co-insurance, excess/deductible)
- Pre-authorisation
- Hospital networks
Simplicity and clarity - CI
Two main aspects to simplicity:
1) lump sum payout
2) the claims trigger of diagnosis or procedure is easy to explain
Not so simple:
- subject to exclusions and point-of-claim underwriting
- definitions may differ between insurers
- certain definitions may require evidence that actual condition covered is more severe than layperson’s understanding
- tiered benefits
Simplicity and clarity - LTCI
- Customers believe that long-term care insurance policies will cover the costs of care in old age
- most policies offer cash rather than care, and adequacy of cash to meet needs many years ahead is not guaranteed
- benefits may be payable for a limited period of time or subject to a max amount
- different benefit levels and increase rates are available
- Trigger points generally defined in terms of ADLs - these need to be explained
Guarantees and reviewability of premiums - PMI
- annually renewable
- guarantees may be available for short period when medical inflation is stable and easy to estimate
- indemnity nature, uncertainty over future trends and lack of control over costs makes guarantees hard to price
Guarantees and reviewability of premiums - CI
- initially reviewable (unknown nature of future risks)
- competition pushed some into offering guarantees
- with trends in incidence for each of the various critical illnesses covered moving in different directions, the increases on future reviews are difficult to predict
- enhancements to reserves for guaranteed products may be significant
