M_F102_Health and care products

Question 1

CI Conditions covered

Answer 1

Cancer Stroke Heart disease Coronary Artery by pass surgery

• condition must be perceived by public to be serious; must be able to clearly define qualifying conditions; must have data to price the benefit.

Question 2

CI Product Variations

Answer 2

• possible for benefits to be tiered, pays out a partial benefit depending on severity of the condition

Question 3

CI Risks to the insurer

Answer 3

• main risk is higher than expected rates of diagnosis, related anti-selection risk and selective withdrawals (individual contracts) and withdrawal when asset share is negative.

Question 4

Long Term Care

Answer 4

All forms of continuing personal or nursing care and associated domestic services for people who are unable to look after themselves, whether in their own home or in a state-sponsored or care-home setting.

Question 5

LTC Pre-funded products

Answer 5

Benefit trigger depends on claims definition (single/multiple event e.g. disabled at a certain level for a certain duration)

Question 6

LTC Product Variations

Answer 6

Premiums may be guaranteed, useful as policyholders may be living off a fixed pension.

Question 7

LTC Immediate needs solutions

Answer 7

Provides for individuals needing care due to uncertain survival period, receive guaranteed lifetime income for a single premium.

Question 8

LTC Pensions Solutions

Answer 8

Usually LTCI needed for people in retirement who are receiving a pension.

LTCI needed as pension is usually not enough to cover cost of care, possible to have a pension plan with CI rider.

Question 9

LTC Risks to the insurer

Answer 9

Main risk relates to transfer probabilities, healthy/sick/death, sick to healthy unlikely, but may transit between sick states.

Question 10

LTC Capital Requirements

Answer 10

Similar to an endowment as a benefit may or may not be paid (but this may depend on product design)

May also depend on extent of guarantees offered.

Question 11

LTC Risks to the insurer

Answer 11

Claim definition (e.g. ineffective use of ADLs) may lead to exploitive claims.

Question 12

LTC Risks to the insurer

Answer 12

Investment risk as significant reserves may ne needed, also expense risk.

Question 13

LTC Risks to the insurer

Answer 13

Marketing risk as benefit may not cover full cost of care.

Question 14

LTC Immediate needs solutions

Answer 14

Helps determine quality of care insured can afford.

Benefits may escalate.

Death benefit also possible.

Question 15

LTC Immediate needs solutions

Answer 15

Similar to impaired annuity, but structure may vary, also consider tax, capital and benefit flexibility differences.

Question 16

LTC Product Variations

Answer 16

But guarantee may be expensive due to uncertain pricing basis and capital requirements.

Question 17

LTC Product Variations

Answer 17

Unit-linked version possible. Offers a surrender/death benefit, combines investment element with LTCI. Split unit/non-unit fund, risk of rising risk charge eroding unit fund, unit fund may be used to draw from or may be protected.

Question 18

LTC Product Variations

Answer 18

Indemnity vs. cash benefits. Full indemnity unlikely as cost too uncertain for insurer.

Question 19

LTC Product Variations

Answer 19

Due to uncertainty, premium may be loaded and may then be excessively expensive, hence reviewable pre-funded plans more common,

Question 20

LTC Pre-funded products

Answer 20

Benefit may dependent on level of disability (e.g. pay 50% if fail 2 of 6 ADLs)

Question 21

CI Conditions covered

Answer 21

• may be split into ‘core’ and ‘additional’ benefits

Question 22

CI Product Variations

Answer 22

• premium rates may be guaranteed or reviewable, reviewable popular since CI products are new and claim costs uncertain.

Question 23

CI Risks to the insurer

Answer 23

• possible expense risk, minimal investment risk.

Question 24

Long Term Care

Answer 24

Intended for people unlikely to get better. Covers a wide range of needs, some people may require minimal assistance.

Question 25

Long Term Care

Answer 25

Care may be formal or informal (e.g. by family members).

Question 26

Long Term Care

Answer 26

Nursing-care only is narrowest form of long term care.

Question 27

Long Term Care

Answer 27

Costs broadly divided into living costs, housing costs and personal care.

Question 28

Long Term Care

Answer 28

Specialist medical care may also be required.

Question 29

CI Risks to the insurer

Answer 29

- risk of inappropriate underwriting and claim management due to difficulty in carrying out these tasks.

Question 30

CI Risks to the insurer

Answer 30

- potential reputational damage if misunderstanding of benefits covered.

Question 31

CI Risks to the insurer

Answer 31

- difficult to source adequate data for pricing, particularly if benefits are tiered.

Question 32

CI Risks to the insurer

Answer 32

- difficult to define benefits (that are legally and medically objective, but understandable to the consumer).

Question 33

CI Product Variations

Answer 33

- possible to add conditions to the covered list, little extra risk for greater perceived benefit.

Question 34

CI Product Variations

Answer 34

- on the downside, may cover condition that is no longer critical due to medical advances, example of benefit not meeting the need.

Question 35

CI Product Variations

Answer 35

- also possible that benefit exceeds costs to cover medical expenses or lifestyle adjustments, again example of benefit not meeting need.

Question 36

CI Conditions covered

Answer 36

- potentially many conditions may be covered, that offer minimal additional benefit to the policyholder.

Question 37

CI Conditions covered

Answer 37

- terminal illness is often added, which covers conditions that reduce life expectancy, may also appear as an accelaration benefit on a life policy.

Question 38

CI Conditions covered

Answer 38

Childrens benefits may be included as a rider, with such benefit payment not leading to a cessation of cover, often cost is less than the perceived benefit

Question 39

LTC Pre-funded products

Answer 39

Benefit may be a lump sum, annuity certain or annuity with max payment term. Benefit may escalate and period of payment may be an option. The benefit, if limited, may hence not meet the need.

Question 40

LTC Pre-funded products

Answer 40

Premiums may be single, regular, restricted regular or retrospective (e.g. from home equity release).

Question 41

LTC Pre-funded products

Answer 41

Usually death benefit not provided, surrender benefit also unlikely, paid up benefit likely.

Question 42

LTC Pre-funded products

Answer 42

May allow for cost of assistive devices, which in turn may help defer the trigger of further benefits. Care advice common.

Question 43

LTC Pre-funded products

Answer 43

ADLs most commonly used to assess level of dependency, may also be a mental impairment trigger.