Chapter 6: Product design (1)

Question 1

List the needs met by PMI

Answer 1

medical attention without waiting
medical attention in ahigher standard of accommodation
medical attention withdoctor of choice
medical attention in alocal hospital

Question 2

List the needs met by CI

Answer 2

provide income when unable to work
repay balance outstanding on loan
fund surgery or treatment required
fund lifestyle changes - moving to a less stressful job
business partners purchasing CI on the lives of each other
fund recuperation and rehabilitation treatment - installation of specialist equipment to enable claimant to remain at his/ her house
taxation planning

Question 3

List the needs met by tiered CI

Answer 3

closer fit to medical and financial needs

Question 4

List the needs met by LTCI

Answer 4

Financing care at home when the policyholder is unable to take care of himself/ herself
Financing care in specialized facilities such as retirement home

provide different levels of support that policyholder may need, for example providing support in choosing appropriate healthcare providers

facilitate the cost of care in an informal care setting, for example installing stair-lifts

reduce dependence on government long term care benefits

Question 5

Explain why, in practice, critical illness benefit payouts might not correspond well to the needs its designed to meet

Answer 5

not comprehensive in the illnesses/ conditions covered
policyholder may not be able to claim as expected given complex claim definitions
exclusions may apply
policyholder may not easily be able to convert lump sum into appropriate annuity income
lump sum may be more or less than value of loan
treatment costs may already be covered from pmi - windfall gain