Chapter 8 (CI) Flashcards
What are the main differences between the benefits available under a major medical expense (MME) policy to those available under a critical illness (CI) policy? [3.5]
The qualifying event for MMEs is having one of the operations on the insured list.✓✓
The operation may be needed to cure a serious illness✓ (e.g. heart-bypass operation)✓ or … may be to relieve a condition that is serious, but not life threatening✓ (e.g. hip-replacement operation)✓.
Some CI benefits are payable when a specified operation is required.✓✓ These tend to be very serious operations✓ (e.g. heart-bypass)✓ …
… and so there is some overlap with MME in this respect✓.
However, most CI benefits are payable on diagnosis of a specified serious illness.✓✓ In these cases, there is no requirement to have an operation.✓✓
While CI may pay a sum insured for a condition related to some operations✓, it would not pay for other conditions that may require operations on the MME list✓.
Question 8.2
Describe the advantages to the insured of a combined critical illness (CI) and private medical insurance (PMI) product. (3)
The PMI benefit covers cost of acute treatment✓✓ … and cover for chronic conditions may be limited✓ …
whereas CI can provide additional cover for ongoing medical expenses.✓
PMI only covers medical expenses✓ …
whereas a CI benefit can be used to cover other costs✓, …
such as debt✓, income loss✓, lifestyle adjustment✓, etc.
Expenses will be lower for the combined product.✓✓
Anti-selection may be lower✓✓, because individuals will buy cover against general medical expenses, rather than covering themselves for particular illnesses✓.
Lower expenses and margins for adverse selection should result in a cheaper product.✓✓
Question 8.5 Define the following terms that may apply to critical illness insurance:
i) Survival period
ii) Permanent [3]
This is a feature on a stand-alone CI policy✓ or a rider benefit✓.
Put differently, it does not apply on an accelerator product …✓
… where the survival period applies from the CI event date✓ …
and only if the insured life survives this period✓, will the benefit be paid✓.
This prevents the CI policy from acting like a life assurance policy.✓✓
(Maximum 2)
ii)
l This term is used to describe a health condition that is expected to last throughout the insured person’s life✓✓, …
… irrespective of when the cover ends or the insured person retires✓✓
Question 8.5 Define the following terms that may apply to critical illness insurance:
iii) Irreversible
iv) Total permanent disablement [2.5]
Irreversible conditions are those that cannot be cured by medical treatment and/or surgical procedures at the time of the claim.
(Maximum 1⁄2)
iv)
The word total in the definition is usually taken to mean ‘major and substantial’.
The word permanent is often difficult to define in this context and the insurer’s interpretation does not always match the policyholder’s understanding and expectation.
One definition proposed is ‘beyond the hope of recovery in your lifetime’.
Total permanent disablement might be specified in terms of inability to perform own occupation, suited occupation, or any occupation.
Alternatively it might be specified in terms of inability to perform work tasks or other activities.
(Maximum 2)
Question 8.5 Define the following terms that may apply to critical illness insurance:
v) Terminal illness. [0.5]
This is a medical condition that is expected to result in the person’s death within a short period, e.g. 12 months.
Explain how future developments in medicine may be expected to affect claim costs under the following health and care insurance contracts: i) Critical illness insurance ii) Private medical insurance.
(3) (2
Medical developments can increase the rate of disease diagnosis. l This can make claims occur sooner; … l … or it can make claims occur in the policy term, which would previously have occurred only after the end of the contract with no cost.
l Both cases will increase the cost of claims, especially the second case. l Some diseases will be diagnosed that would never have otherwise been recognised. l Medical advances may prevent some diseases from occurring, thereby reducing claim costs.
l Some CI claims relate to the need for specific expensive treatments (like heart bypass surgery).
l Medical advances can mean that some of these treatments no longer occur, so reducing claim costs.
l Alternatively, medical advances can enable many more people to receive the treatment, thereby increasing claim costs.
Explain how future developments in medicine may be expected to affect claim costs under the following health and care insurance contracts: i) Critical illness insurance ii) Private medical insurance.
(3) (2
Medical developments can increase the rate of disease diagnosis. l This can make claims occur sooner; … l … or it can make claims occur in the policy term, which would previously have occurred only after the end of the contract with no cost.
l Both cases will increase the cost of claims, especially the second case. l Some diseases will be diagnosed that would never have otherwise been recognised. l Medical advances may prevent some diseases from occurring, thereby reducing claim costs.
l Some CI claims relate to the need for specific expensive treatments (like heart bypass surgery).
l Medical advances can mean that some of these treatments no longer occur, so reducing claim costs.
l Alternatively, medical advances can enable many more people to receive the treatment, thereby increasing claim costs.
N2014 Q1 (i), (ii) & (iii) [10]
N2014 Q6 (i)-(ii) [6]
N2014 Q6 (iii) [6]
N2016 Q3 (i) [5]
N2016 Q3 (ii) [6]
J2017 Q3 (i) [5]
J2017 Q5 (i) [8]
N2017 Q1 [7]
