lotter actuarial partners 1 by: johan l lotter fia asa maaa managing partner: lotter actuarial...
TRANSCRIPT
![Page 1: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/1.jpg)
1Lotter Actuarial Partners
By: Johan L Lotter FIA ASA MAAAManaging Partner: Lotter Actuarial Partners Inc.October 2002
Web: lotteract.com
Critical Illness
![Page 2: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/2.jpg)
2Lotter Actuarial Partners
Provides Lump Sum on Diagnosis of any of the following “Big Five”
• Cancer• Heart Attack• Stroke• End Stage Renal Disease• Organ Transplant
What Does CI Insure?
![Page 3: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/3.jpg)
3Lotter Actuarial Partners
Many insurance companies cover other diseases too:
Multiple Sclerosis, Alzheimer’s, Blindness, Coma, Diabetes, Liver Failure, Deafness, Loss of Speech, Motor Neuron Disease, Paraplegia, Rheumatoid Arthritis, Severe Burns, Systemic Lupus, Total and Permanent Disability.Partial Benefits are often provided in case of heart surgery: Bypass, Angioplasty, Valve Surgery, Aorta Graft
What Does CI Insure?
![Page 4: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/4.jpg)
4Lotter Actuarial Partners
• Product Design and Pricing• Marketing and Distribution• Valuation• Regulation
Critical Illness
![Page 5: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/5.jpg)
5Lotter Actuarial Partners
• Product Invention
• Formulas
• Data
• Underwriting
CI Product Design and Pricing
![Page 6: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/6.jpg)
6Lotter Actuarial Partners
xi xq and
Product Design: Binomial Similarity
![Page 7: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/7.jpg)
7Lotter Actuarial Partners
One To One Correspondence
• Life Policy And Critical Illness Policy
• Critical Illness Rider
Unlimited Invention And Design Possibilities
Product Design
![Page 8: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/8.jpg)
8Lotter Actuarial Partners
Pricing Issues• Cost Of Raw Material
• Contract Terms Embedding Raw Material
xi
Pricing Issues
![Page 9: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/9.jpg)
9Lotter Actuarial Partners
Contract Terms Embedding Raw Material
•Term•Whole Life•Universal Life•Rider To Life Policy•Anything You Would Care To
Invent
Product Design
![Page 10: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/10.jpg)
10Lotter Actuarial Partners
Formulas
Two Major Formulas.
• Stand-Alone Product• Rider Benefit
![Page 11: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/11.jpg)
11Lotter Actuarial Partners
Formulas
• Stand-Alone Product.
• (Amount At Risk) * ix
![Page 12: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/12.jpg)
12Lotter Actuarial Partners
Acceleration Rider.
(Amount At Risk) X (ix +qx –kxqx)
= (Amount At Risk) X {ix
+(1 –kx)qx}
Formulas
![Page 13: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/13.jpg)
13Lotter Actuarial Partners
Data Edmund HalleyBorn 11-08-1656Died 01-14-1742Astronomer(Halley’s Comet)Actuary(Mortality TablesCity of Breslau)Deputy Controller(Royal Mint)Captain, Royal NavyHMS: Paramore PinkProfessorGeometrySavilian (Oxford)
![Page 14: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/14.jpg)
14Lotter Actuarial Partners
Data
• Insured Lives Data Overseas• No Insured Lives Data in USA• Population Data
![Page 15: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/15.jpg)
15Lotter Actuarial Partners
Insured Lives Data Overseas
• South Africa• United Kingdom• Australia• Canada
![Page 16: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/16.jpg)
16Lotter Actuarial Partners
Data
• “New” Product Everywhere • Overseas Insured Data Too
Thin• No Insured Lives Data in USA• Foreign Data Unsuitable• Population Data Available
Everywhere
![Page 17: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/17.jpg)
17Lotter Actuarial Partners
Data
• Use Population Data• Population Data in USA
– Cancer: SEER– Heart Attack: Framingham– Stroke: Framingham – End Stage Renal Failure: NIOH– Organ Transplant: UNOS
![Page 18: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/18.jpg)
18Lotter Actuarial Partners
Data Cancer: SEER
• Voluminous Data• Incidence Rates On Base of Well
and Sick• Over 41 Separate Cancer Sites
Covered• Over 14% of US Population in
Exposure
![Page 19: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/19.jpg)
19Lotter Actuarial Partners
Data Heart Attack, Stroke: Framingham
• Small Study• Old Study• First Class Data• Dawber Analysis Flawless
![Page 20: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/20.jpg)
20Lotter Actuarial Partners
Data: ESRD
• Medicare
Statistics
• University of
Michigan
ESRD Annual Incidence Rates (all ethnic groups)(1995)
Age Band Rate per Million0- 19 1320- 44 10945- 64 50865- 74 1,09775+ 1,035
![Page 21: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/21.jpg)
21Lotter Actuarial Partners
Data: Organ Transplant
– UNOSNumber of U.S. Transplants by Age Group: 1995
Age Heart- Heart Kidney Kidney- Liver Lung Pancreas Total
Lung Pancreas
N/A 1 1
1 1 72 7 0 121 1 0 202
1-5 1 22 117 0 201 0 0 341
6-10 3 17 146 0 61 1 0 228
11-17 2 41 367 0 71 1 0 482
18-34 29 187 2,696 177 323 21 36 3,469
35-49 27 501 3,198 153 739 37 42 4,697
50-64 4 824 1,917 4 639 32 5 3,425
65+ 0 41 206 0 46 0 0 293
Total 67 1,705 8,655 334 2,201 93 83 13,138
![Page 22: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/22.jpg)
22Lotter Actuarial Partners
Key Techniques
1. Population Statistics2. Converting SEER to Healthy
Denominator: Pollard Methods3. Converting Population Statistics
to Insured Lives Statistics: Portfolio Calibration
![Page 23: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/23.jpg)
23Lotter Actuarial Partners
Pollard Methods
People Get Critical Illnesses And Die. • Gathering Statistics• Model Interaction Of Illness And
Death
![Page 24: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/24.jpg)
24Lotter Actuarial Partners
Population Model Of Critical Illness
xl
xd Dx(aid) O
x(aid)
x(al)
n
x(ail) x (ail)
![Page 25: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/25.jpg)
25Lotter Actuarial Partners
Formulas: Population Model Of Critical Illness
21 xx
x mm
q
Lkmaid
Lmiail
llL
dll
lqd
xDx
xxnx
xxx
xxx
xxx
1
1
2
1
![Page 26: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/26.jpg)
26Lotter Actuarial Partners
xxDx Lkmaid
xx
Dx
nx
x
xxOx
kmm
aidail(ail)
kmmaid
21
1
22
xxxxxxx
Ox
Dx
nxxx
L(mi)Lkmmalal
aidaidailailail
1
1
Formulas: Population Model of Critical Illness
![Page 27: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/27.jpg)
27Lotter Actuarial Partners
Formulas: Population Model Of Critical Illness
x
nx
x (al)
(ail)i
![Page 28: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/28.jpg)
28Lotter Actuarial Partners
Rate Calibration
• Every Market Place Unique• Every Underwriting Regimen
Unique• Population Incidence Rates Cannot
be Used Without Calibration to Your Own Portfolio
![Page 29: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/29.jpg)
29Lotter Actuarial Partners
Calibration Technique
If you have: • Reliable population incidence rates • Reliable population death by cause
rates• Reliable portfolio death by cause
rates
AND
![Page 30: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/30.jpg)
30Lotter Actuarial Partners
Calibration Technique
If you know the Calibration formula
THENYou can make accurate rates
for any indigenous insurance portfolio
![Page 31: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/31.jpg)
31Lotter Actuarial Partners
Calibration Technique : Things We Know• Population Critical Illness Incidence
Rate
•Population Critical Illness Death Rate Proportions
Pxk
Pxi
![Page 32: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/32.jpg)
32Lotter Actuarial Partners
Calibration Technique : Things We Know
Insured Portfolio Critical IllnessIncidence Rates
Insured Portfolio GraduationFactors
Population Graduation Factors
Gxi
Pxw
Gxw
![Page 33: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/33.jpg)
33Lotter Actuarial Partners
Calibration Technique
The Calibration Formula
P
x
P
x
P
x
G
x
G
x
G
x
P
xG
x qkw
qkwii
![Page 34: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/34.jpg)
34Lotter Actuarial Partners
Calibration Technique
)
xl
s
xl
(1
)
xq
xk
D2
xq
xl
s
xl
(1
D1
xq
1
xw
![Page 35: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/35.jpg)
35Lotter Actuarial Partners
Underwriting and Calibration
Use the Calibration formula totransition from:
• Aggregate to smoker- non-smoker• Standard to substandard• Aggregate to Select and Ultimate
![Page 36: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/36.jpg)
36Lotter Actuarial Partners
Why Do All This Work?
• Why not just use rates already developed overseas?
![Page 37: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/37.jpg)
37Lotter Actuarial Partners
Why Do All This Work?
• “Fabric” of Foreign CI Experience Is Different
• Climate and Environment• Diagnostic Practice and Equipment• Integrity of Statistical Research• Availability of Treatments
– Bypass Surgery– Organ Transplant Expertise
![Page 38: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/38.jpg)
38Lotter Actuarial Partners
Special Considerations For Reinsurers
• Diversity of Definitions• Diversity of Elimination Periods• Diversity of Benefit Structures• Diversity of Portfolios
![Page 39: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/39.jpg)
39Lotter Actuarial Partners
Special Considerations For Reinsurers
• Diversity of Underwriting Considerations
• Anti-Selection in Large Policies• No Catastrophic Exposure• No “Suicide Risk”
![Page 40: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/40.jpg)
40Lotter Actuarial Partners
Marketing Considerations
• Stand-Alone• Rider
![Page 41: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/41.jpg)
41Lotter Actuarial Partners
Marketing Considerations:Standalone
• Affordability• Elimination Periods Unpopular• Health Insurance Filing• Loss Ratio Requirement• Benefits Lost on Death
![Page 42: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/42.jpg)
42Lotter Actuarial Partners
Marketing Considerations. Rider
• Affordability• Similarity to Acceleration on
Diagnosis of Only 12 or 24 Months to Live-”CI Light”
• Closes Apparent “Holes”• Elimination Period Not Needed
![Page 43: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/43.jpg)
43Lotter Actuarial Partners
Marketing Considerations. Successes and Failures
South Africa• Acceleration Rider• Affluent Policyholders• Usually Rider to Whole Life or
Endowment Policy
![Page 44: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/44.jpg)
44Lotter Actuarial Partners
Marketing Considerations. Successes and FailuresUK• Great Success to Date• Acceleration Rider 86% of UK sales• 14% Of UK Sales Standalone• 70 Companies Offer CI • $80 Billion Of In Force Business• Twice Size of Disability Market
![Page 45: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/45.jpg)
45Lotter Actuarial Partners
Marketing Considerations. Successes and FailuresUK• 3%-4% Of Population has Benefit• Parsimonious UK Social Medicine
System • Rider Products Usually Rider to
Mortgage Endowment
![Page 46: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/46.jpg)
46Lotter Actuarial Partners
Marketing Considerations. Successes and Failures
Australia• Acceleration Rider• Affluent Policyholders• Usually Rider to Whole Life or
Endowment Policy
![Page 47: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/47.jpg)
47Lotter Actuarial Partners
Marketing Considerations. Successes and Failures
Australia• Essential to Sales of Life Insurance• 31 of 33 Companies Offer CI• 2% Of Population has Benefit
![Page 48: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/48.jpg)
48Lotter Actuarial Partners
Marketing Considerations. Successes and Failures
Japan
• Very Popular• 4% Of Population Has Benefit
![Page 49: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/49.jpg)
49Lotter Actuarial Partners
Marketing Considerations. Successes and Failures
Europe• Standalone• To Date No Big Success• Social Security Lessens Needs For
Private Insurance• European Conservatism• Only German and Swiss Leadership
![Page 50: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/50.jpg)
50Lotter Actuarial Partners
Marketing Considerations. Successes and Failures
USA• Standalone• Usually Worksite Marketing• Moderate Success to Date• Optimistic Projections $3 Billion to $5
Billion Premium (to date) by 2010• Product Too Revolutionary?
![Page 51: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/51.jpg)
51Lotter Actuarial Partners
Marketing Considerations. Successes and Failures
USA PROBLEMS• Hard For Life Agents to
Understand?• There Are Few Individual Health
Agents.• Falls Between “Cracks” of Product
Development.
![Page 52: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/52.jpg)
52Lotter Actuarial Partners
Marketing Considerations. USA: What Will Work?
Rider Approach• Present as Acceleration Benefit
“Heavy”• Train Life Agents• Price Realistically• Underwrite Sensibly• Brand Benefit Under Name
Company
![Page 53: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/53.jpg)
53Lotter Actuarial Partners
Marketing Considerations. USA: What Will Work?
Standalone Approach• Present as Voluntary Health Insurance• Find Niches in Employee Situations• Worksite Marketing• Voluntary Benefits• Price Realistically• Underwrite Sensibly• Brand Benefit Under Name Company
![Page 54: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/54.jpg)
54Lotter Actuarial Partners
US Regulatory Constraints
• Standalone Product Approved in 46 States
• Holdouts (Sandy Meltzer)– Connecticut– Iowa– Pennsylvania– Utah
![Page 55: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/55.jpg)
55Lotter Actuarial Partners
US Regulatory Constraints
• Acceleration Rider Product• Approved in 50 States (Sandy
Meltzer)• Product Ready for Nationwide
Branding
![Page 56: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/56.jpg)
56Lotter Actuarial Partners
US Regulatory Constraints
• Six States Object to Waiting Period• 15 States Object to Elimination Period• Insured Must have Other Health Insurance
(CA)• Loss Ratios Vary From One State to Next
( 55% to 60%)• Not All States Allow Return Of Premium
![Page 57: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/57.jpg)
57Lotter Actuarial Partners
US Regulatory Constraints
Nationwide Introduction May Imply Some 30 State Variations
![Page 58: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/58.jpg)
58Lotter Actuarial Partners
US Regulatory Constraints
Internal Revenue Code• IRC Section 7702 Compliance
Acceleration Rider• Section 104(a)(3)
– Acceleration Rider– Standalone or Health Insurance Rider
![Page 59: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/59.jpg)
59Lotter Actuarial Partners
Foreign Critical Illness Experience (South Africa)
• South Africa (1991-1994 Investigation)• Largest Exposure To Date • Over 1.2MM Years Of Exposure• Three Companies In High End Of Market• Cause Of Claim Not Analyzed• Female Experience Better Than Male
![Page 60: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/60.jpg)
60Lotter Actuarial Partners
Foreign Critical Illness Experience (South Africa)
• South Africa• Confirms Select Period Rates
Lower• Large Policy Claims Worse Than
Smaller Policies• Non-Medical Marginally Better
Than Medical
![Page 61: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/61.jpg)
61Lotter Actuarial Partners
Foreign Critical Illness Experience (South Africa)
MalesDuration 0 Duration 1+ Dur 0/
Ages Claims Exposure Obs Rate Claims Exposure Obs Rate Dur 1+ 20-24 6 49,367 0.12 15 55,676 0.27 45% 25-29 13 56,397 0.23 37 108,560 0.34 68% 30-34 16 45,222 0.35 76 117,433 0.65 55% 35-39 29 30,510 0.95 122 96,027 1.27 75% 40-44 39 18,466 2.11 168 67,498 2.49 85% 45-49 25 9,272 2.70 143 39,716 3.60 75% 50-54 14 3,493 4.01 115 18,267 6.30 64% 55+ 6 682 8.80 56 6,188 9.05 97%All 148 213,409 0.69 732 509,365 1.44 48%
![Page 62: Lotter Actuarial Partners 1 By: Johan L Lotter FIA ASA MAAA Managing Partner: Lotter Actuarial Partners Inc. October 2002 Web: lotteract.com Critical Illness](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e595503460f94b52cde/html5/thumbnails/62.jpg)
62Lotter Actuarial Partners
CI Valuation Principles
• Not addressed separately by SVL• Standalone Consistent with Health
Regulation• Workable Rider Basis
– Consistency with Commissioner’s Life Basis
– Consistency with Rate Guarantees