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					    AHOU
  Living Benefit
Products & Riders
                         Denise Liston
                         Joan Tolan
                         Mitch Viau
        Las Vegas

    October 24th, 2006
                 Agenda

I.     Principles of Pricing
II.    Mortality versus Morbidity
III.   Principles of Underwriting
IV.    Underwriting Case Clinic
       Principles of Pricing
Properly price the risk that is being placed
with the Insurance Company
Key risks with most insurance products are:
- Mortality/Morbidity
- Lapses
- Expenses
- Interest
- Distribution
      Product Comparison - Pricing

             Life               DI                   CI                  LTC
Trigger       Death          Satisfying          Diagnosis of a    Inability to perform 2
                             disability        covered condition   or more ADLs and/or
                             definition           and survival         is Cognitively
                                                                          Impaired
Benefit     Indemnity     Reimbursement,          Indemnity          Reimbursement,
                             Indemnity                                  Indemnity
            Lump Sum                              Lump Sum
                          Monthly Benefit                             Daily, Weekly,
                                                                         Monthly
Ultimate   Known – Face    Unknown until        Known – Face       Unknown until death
Cost         Amount       death or expiry of      Amount             or expiry of the
                             the policy                                   policy

Benefit        No          Dependent on              ???                    No
Taxable                       source of
                           premium funds
            Principles of Pricing

Life Risk:
Mortality
  Vast amount of Proprietary and Industry Data
  in both Canada and the U.S.
  Technological improvements, along with
  mortality improvements, tend to improve
  profitability if they were not assumed in pricing
         Principles of Pricing


Disability Insurance
  Monthly benefit triggered by satisfying the
  disability definition
  Disability Policies have different Guarantees:
      i) Non-Cancellable
     ii) Guaranteed Renewable
     iii) Cancellable
         Principles of Pricing
Disability Insurance
  Vast amount of Proprietary and Industry Data
  in the U.S.
  Data is mainly proprietary in Canada
  Morbidity Risk:
  - Incidence/Recovery/Incidence again if
  recovered
  Ultimate cost is unknown until insured dies or
  policy terminates
          Principles of Pricing


Critical Illness Insurance
  CI is the most similar to Life
  Lump Sum Benefit upon diagnosis and survival
  of one of the covered conditions
         Principles of Pricing

Critical Illness Insurance
  Lack of Canadian and US specific data
  CI Incidence Rates must be
  1) Created “In House”
  2) Partner with a Reinsurer or a
     Consultant
  Non-Cancellable or Guaranteed
  Renewable
          Principles of Pricing

Critical Illness Insurance
    Variations:


    i) CI Waiver or Premium Rider


    ii) 2nd Event Rider
          Principles of Pricing
Long Term Care
  Coverage for Home Care, Facility Care or both
  Benefit is a $ amount per day, week or month
  Guaranteed Renewable – some policies
  provide for a max. premium adjustment
  Indemnity vs. Reimbursement
  Claim Costs are dependent upon the
  Elimination Periods (0, 30, 90 180) and
  Coverage Period (2yr, 3yr, 5yr, or Life, etc.)
           Principles of Pricing
Long Term Care
  US data is available, but number of insured claims is
  still small
  US plans are continuously changing. One should use
  Industry tables, modified for their own company
  experience, if available, and anticipated changes due
  to improvements in underwriting and technology
  Lack of credible Canadian data
  Requires LTC Incidence Rates, Utilization Rates, and
  Termination Rates from either recovery or death
    Mortality vs. Morbidity


Actuarial
Incidence versus Death
      Mortality vs. Morbidity

Underwriting
 Life – risk selection and mortality
 DI   – risk selection and occupation
 CI   – risk selection and incidence of
        covered conditions
 LTC – risk selection, stability and ADL’s
               Product Comparison - UW
                   Life                   DI                     CI                  LTC
Trigger             Death             Satisfying            Diagnosis of a     Inability to perform 2
                                  Disability Definition   covered condition    or more ADLs and/or
                                                             and survival          is Cognitively
                                                                                      Impaired
Ages                0 - 90              20 - 60                 0 - 70               20 – 100

Risk Factors      Build, BP,        Occupation,            Family History,          Cognitive
                 Cholesterol,         income,
                  Diabetes,        Musculoskeletal,       CV hx, Cancer hx       Functional Loss
                  Smoking          Mental / Nervous
Claims         Cardiovascular      Musculoskeletal             Cancer          Alzheimer’s Disease
                                                                                 Musculoskeletal
                   Cancer          Mental / Nervous          Heart Attack        Stroke - Cardiac
Evidence         Blood, Urine,       Blood, Urine,        Blood, PSA, Urine,    Face to Face and/or
Required       saliva, PM / Med    saliva, PM / Med        saliva, PM / Med          Telephone
                exam, APS, IR,      exam, APS, IR,          exam, APS, IR,     Interviews, Cognitive
               ECG, stress ECG     ECG, Telephone                ECG             Screening, Medical
                                      Interviews,                                     Records
                                    Financial, Tax
                                        Returns
      Mortality vs. Morbidity

Market Awareness
 Life – sales are flat
 DI   – sales are decreasing
 CI   – market awareness is growing in the
        U.S., sales were increasing and are
        now flat in Canada
 LTC – sales are flat in the U.S., market
       awareness is growing in Canada
       Mortality vs. Morbidity

                United States
   New Business Premium Change (%) - LIMRA


         2002        2003       2004   2005
Life      +3         - 0.5       +6     +1
 DI       +4          -1         +1     +4
 CI
LTC       +5          -7        - 25     -5
       Mortality vs. Morbidity

                 Canada
   New Business Premium Change (%) - LIMRA


         2002      2003      2004       2005
Life      -3        -1        -1         +5
 DI       +5         0        -8         -1
 CI      + 43      + 34      + 11        +1
LTC      + 78       +2        -3        + 18
        Mortality vs. Morbidity
Agent and Underwriter Training
Life, DI, CI, LTC
  Key to product success
  Significant field underwriting is needed to
  assure successful placement
  Pre-screening Questionnaire
  Understand the contract wording
       Principles of Underwriting
Underwriting Philosophy
  Life - risk factors for early death
  DI   - risk factors and incentive to return to
          work
  CI   - risk factors for early diagnosis
  LTC - balance stability of current medical
        conditions to evaluate future disability
       Principles of Underwriting
Application and Requirements
  Life - medical, non-medical, financial
  DI   – medical, non-medical, financial
  CI   – medical, non-medical, financial
  LTC – medical only. Financial is becoming an
        issue with younger ages
     Principles of Underwriting
Anti-Selection in Life, DI, CI, LTC
  Full disclosure is necessary to evaluate past,
  present and future loss
  Underwriting standards best if applied equally
  across specific groups
       Principles of Underwriting
         Underwriting Case Clinic
Underwrite each case for:
  Life - ?
  DI   -?
  CI   -?
  LTC - ?
                     Case #1
Male , 55 , NS, business owner, applying for:
$5,000,000 UL, $15,000/month DI, $1,000,000 CI,
$300/day LTC

     Import/export, born in Hong Kong

     Multi level Degenerative Disc Disease

     Rx: 3 NSAIDs, occasional narcotic for pain relief
                    Case #2
Male, 50 , NS, plumber, applying for:

$1,000,000 Life, $5,000/month DI, $250,000 CI,

$150/day LTC

     Testicular cancer, Stage 1, at age 40

     Treatment: surgery and radiation

     All follow-ups clear since
                      Case #3
Female , 40 , smoker, cosmetic sales, applying for:
$500,000 Life, $3,000/month DI, $250,000 CI,
$200/day LTC

     Tingling left side at age 32, lasting 6 weeks

     Full investigation at the time with exam and MRI
     negative. No confirmed diagnosis but suspect MS

     No symptoms or follow-up since
                   Case #4
Male, 55, NS, Insurance Broker, applying for:
$2,000,000 Life, $10,000/month DI, $1,000,000 CI,
$300/day LTC


     Myocardial infarction age 50 with emergency
     angioplasty for single vessel disease
     Build, BP, Cholesterol within normal limits
     Current stress ECG normal
                    Underwriting Grid

          Life            DI                     CI                    LTC
          Death     Satisfying         Diagnosis of a covered   Inability to perform 2
                    Disability         condition and survival   or more ADLs and/or is
                    Definition                                  Cognitively Impaired
Case 1   Standard   Exclude spine,           Mild rating        Increase EP,
                    mild rating,                                decrease BP
                    increase EP,
                    decrease BP
Case 2   Standard      Standard        Exclude testicular             Standard
                                       cancer and metastasis
Case 3   Moderate       Decline        Decline.                        Decline
          rating                       Consider with negative
                                       neurological workup,
                                       Exclude MS
Case 4   Moderate   Moderate rating,           Decline                Standard
          rating    increase EP,
                    decrease BP

				
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posted:10/12/2011
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