Health & Care Products (5 – 7) Flashcards
Income Protection Types
Disability income / LT sickness / permanent health insurance
Guaranteed & reviewable
GIO
No claims discounts
IP Benefits
Pre-determined
– income
– lump-sum
… whilst incapacitated for work (illness/disability)
NB
- replacement ratio
- pay to recovery / death / term
- only until retirement age (min 5 yrs)
Level/increasing/index-linked
Reviewable: increase by life even
Surrender: NO
Group: Yes
IP Needs
Needs:
- income replacement
- service loans
- Optional/auto rider on assurance premium waiver
- Locum protection
• Waiting period (at commencement)
• Deferred period
IP Risks
Main
- morbidity (claim inception & claim termination rates)
- data
- anti-selection
- moral hazard
lesser
- mortality
- expense
- investment
- withdrawal
IP Capital
Depending on pricing vs reserving bases
- esp. sickness assumptions
Depends on
- design
- payment frequency
- initial expenses
- solvency capital
Deferred Period
Period of incapacity before any payment is made
Waiting Period
Benefits not paid during specific period after policy initiation
Linked Claims Period
Off-benefit period
Waive deferred period when sickness recurs
IP Claim Definitions
Occupational
– own
– alternative
– any
Alternative
– ADL
– FAT
– ADW
– PCA
Functional assessment tests
Personal capability assessment
Over Insurance mitigation techniques (5)
– financial u/w
– periodic checks
– sales staff training
– policy conditions
– benefit limits
> max overall
> replacement ratio
> limit high salaries
Critical Illness Types & Forms
AKA
- dread disease
- serious illness
- crisis cash
- living assurance
Terminal illness
Children’s benefit
Tiered benefits
Guaranteed & reviewable
Total & permanent disability
Most without-profits
Also
- With-profits
- Unit-linked MAX[ unit value; guaranteed min benefit ]
- stand-alone
- rider
- accelerator
CI Benefits
Lump sum (typical) / impaired life annuity.
Payable on CI event
– defined degree of impairment
– undergo surgical procedure
Surrender: No
Group: Yes
SA CORE
- heart attack
- cancer
- stroke
- CABG
Coronary Artery By-pass Graft
CI needs based on (3)
&
Needs (7)
Based on:
- perceived seriousness
- conditions clearly definable
- sufficient data
Meet:
- income while cannot work
- repay loan
- medical costs
- partnership buyout
- change lifestyle
- recouperation
- specialist equipment
**NOT Indemnity
CI Risks
Rate of diagnosis
- morbidity
- limited info
- signif. anti-selection
- selective withdraw
Stand-alone
- expense
- minimal investment risk
CI Capital
Stand-alone / marginal rider: same as IP
- expense & commission of same order
- supervisory similar
reserve for late notified
(notification period)
Guarantees cause
- increase capital need
- with medical advances
CI Total & Permanent Disability
3 disability types
- occupation based
- ADLS
- Working activities
Compliments CI
- CI is temporary disability
Survival Period
Period after disability / illness to survive before benefit is paid
Moratorium
Do not cover conditions that existed during pre-specified period.
Will cover after a few years if no treatment/symptoms/advice takes place
Notifications Period
Period need to notify insurer from when condition / claim incident occurs
Long-Term Care Insurance
Continuing personal / nursing care
Surrender: No but paid up
Min premium payment period, paid-up:
- reduce benefits (main/death)
- increase deferred period
- reduce benefit escalation
- reduce benefit payment period
Group: NO
LTCI Forms
Traditionally w/o profits
Pre-funded
Unit-linked (refunded)
Immediate needs
Pension
LTCI Benefits
Benefit can be
- lump sum/annuity
- indemnity based
- advice
single / multiple event trigger
- ADL & cognitive impairment
Variations:
- guaranteed vs reviewable
- cash vs indemnity (expensive)
LTCI Needs
Financial protection against need for LT care in future:
- no informal
- no/insufficient State benefits
Structure stand-alone / integrated:
> added to CI – TPD with loss of independent existence criteria
> rider on whole (large S)
> added to IP: cover beyond retirement age (bad combo)
LTCI Risks
Main risk is transfer probabilities. Claim:
- inception prob
- claim states
- signif. anti-selection
- selective withdraw
- moral hazard
** Investment risk
significant reserves
Expense risk (LT)
- Neg asset share risk
- Marketing
- reputational
LTCI Capital
Comparable to endowment
Dependent on guarantees
Significant
- LT & uncertainty
- high initial cost
- large margins
Never as high as whole life
LTCI Unit-linked
Guarantees:
- none
- protection from fixed age
- full guarantee (managed / with-profits
Savings & protection
- death/surrender benefit
- LT care
- wealth transfer
LTCI Immediate Needs
Shorter duration: need care now
Single premium
Aids with:
- uncertain survival duration
- certainty of capital cost
- guarantee lifetime income
Impaired life annuity: w/o profits & non-link
- unit exist (wealth transfer)
- expense risk is lower
- less investment Risk
Lower risk than pre-funded
LTCI Pension
- As rider: increase pension income
- deferred impaired life annuity
Natural link: pensions & LTCI:
- post-retirement needs
- paid by lump-sum/pension income
H&C: Business mix and volume & persistency influenced by
– economic morale
– government provision
– tax
Difficult to predict IP business volume (4)
– depend on economic & political factors
– under-insured
– competition is great & reluctant public
– mis-handling of claims
IP shouldn’t cover (6)
- Unemployment
- Redundancy
- Early retirement
- Reluctance to work again
- HIV
- Attempted suicide
CI disability definitions
- Occupation based
- ADLs
- Working activities / functional abilities
Overinsurance causes
– from outset
– salary increases < benefit increases
– lower tax
– multiple policies
– undisclosed income
LT Care costs
- Housing / Accommodation / Hotel
- Living
- Personal Care
