pitch book: serious illness cover

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Serious Illness Cover Innovative cover for a changing world For advisers

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A Technical Marketing presentation for advisers highlighting the need and opportunities for Serious Illness Cover

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Page 1: Pitch Book: Serious Illness Cover

Serious Illness CoverInnovative cover for a changing world

For advisers

Page 2: Pitch Book: Serious Illness Cover

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1. Do you need Life Cover and Serious Illness Cover?

2. Serious Illness Cover: Why Serious Illness Cover the future?

3. How does Serious Illness Cover work?

4. How does Serious Illness Cover compare to critical illness cover?

5. Serious Illness Cover Booster

6. Additional covers and options

7. Get more with Vitality Optimiser

Agenda

Page 3: Pitch Book: Serious Illness Cover

Do you need Life Cover and Serious Illness Cover?

Page 4: Pitch Book: Serious Illness Cover

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The value of Life Cover and Serious Illness CoverLikelihood of claim payout before age 65

Source: Hannover Re UK Life Branch, January 2013Expected claim likelihood before age 65 are based on best estimates, adjusted to be gender neutral and allowing for future trends, for lives that have been underwritten and accepted on standard rates.

Non-smokerAge 30 at entry

Non-SmokerAge 45 at entry

PruProtect Life PruProtect Life & Comprehensive SIC (Severity A-F)

Like

lihoo

d of

a p

ayou

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7.6 times6.5 times

You could be over 7 times more likely to receive a claim payout if you add Serious Illness Cover to Life Cover

Page 5: Pitch Book: Serious Illness Cover

Serious Illness CoverWhy is severity based cover the future?

Page 6: Pitch Book: Serious Illness Cover

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The world around us is changingWe need to evolve to stay ahead

Indicative not actual trends in sales

LPs

Tapes and videos

CDs and DVDs

Digital

Page 7: Pitch Book: Serious Illness Cover

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Causes of death are constantly changing tooSo protection against illnesses also needs to evolve

Indicative not actual trends in medical conditions

Bubonic Plague

Smallpox

Cancer

1300s 1800s 2000sYear

Page 8: Pitch Book: Serious Illness Cover

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Case study: The changing face of cancerIt’s becoming more common, but it’s becoming less advanced

Rise in incidence rates

Source: Cancer Research UK, 2011European Age-Standardised Incidence Rates per 100,000 Population, by Sex, Great BritainShows incidence rates for all cancers excluding non-melanoma skin cancers.

1 in 2 of us are expected to be diagnosed with cancer in

our lifetimes

Fall in death rates

Page 9: Pitch Book: Serious Illness Cover

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Trend 1: Illnesses are becoming less severeEarlier diagnosis and better treatment mean fewer illnesses progress to a critical status

Critical

Severe

Chronic

Se

veri

ty

Cover should payout a lower amount earlier, reflecting earlier diagnosis and the lower impact of illnesses

Page 10: Pitch Book: Serious Illness Cover

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Trend 2: Diseases are becoming more lifestyle relatedLifestyle is key to managing the risk of illness

Source: Oxford Health Alliance, 3four50.com, January 2014

We need to help people understand and improve their health to prevent the onset of lifestyle illnesses

3

4

50

3 controllable behavioursPoor nutrition, lack of exercise, smoking

4 chronic disease of lifestyleCancer, diabetes, lung disease, Cardiovascular disease

50% of deaths worldwide

Page 11: Pitch Book: Serious Illness Cover

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The number of people living to 100 will increase from 13% to 60%:

Since 1990:

Life expectancy has increased 4.6%, but “healthy” life expectancy has only risen 3.0%

Trend 3: We are living longer, but in ill healthThe risk of one or more illness is increasing

13%

87%

Born in 1951Life expectency 100 or more

Life expectency less than 100

40%

60%

Born in 2012Life expectency 100 or more

Life expectency less than 100

60%

40%

Born in 2060Life expectency 100 or more

Life expectency less than 100

Source: Female life expectancy rates, British Medical Journal, January 2013

We need cover that allows customers to claim more than once

Page 12: Pitch Book: Serious Illness Cover

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• Severity based payoutsWe pay out between 5% and 100% of the Serious Illness Cover depending on the severity of an illness

• We payout earlierWe recognise illnesses are being diagnosed and treated sooner, so we payout on diagnosis for things like early stage cancers, heart attack and stroke

• Cover for more conditionsA severity based approach means we can cover more conditions than any other insurer, so customers are more likely to get a payout

• VitalityAll our plans come with Vitality to help customers improve their health and reduce the risk of illness. They can also access more benefits with Vitality Plus or Vitality Optimiser.

• Cover for progressive and multiple claimsOur approach means if we pay out for a less severe illness, customers still have cover if their condition progresses or if they are later diagnosed with a different condition

Why Serious Illness Cover?

Page 13: Pitch Book: Serious Illness Cover

How does Serious Illness Cover work?

Page 14: Pitch Book: Serious Illness Cover

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• The cover purchased is put into a notional pot - the Plan Account.

• Any claims get paid from the Plan Account, and when this is empty no further benefits can be paid.

The Plan AccountA mechanism to pay out based on severity

Plan Account

Claim 2 reduces the

Plan Account

Claim 1 reduces the

Plan Account

Page 15: Pitch Book: Serious Illness Cover

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Primary cover protects against more severe conditions

• It pays out on severities A-D and covers 102 conditions

Primary Cover Choose the level of cover required

A100%

B75%

C50%

D25%

Primary Cover

Page 16: Pitch Book: Serious Illness Cover

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Primary cover protects against more severe conditions

• It pays out on severities A-D and covers 102 conditions

Comprehensive cover protects against both more and less severe conditions

• It pays out on severities A-G and covers 166 conditions

Comprehensive Cover Choose the level of cover required

A100%

B75%

C50%

D25%

E15%

F10%

G5%

Primary Cover

Comprehensive Cover

Page 17: Pitch Book: Serious Illness Cover

How does Serious Illness Cover compare to Critical Illness?

Page 18: Pitch Book: Serious Illness Cover

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• Conditions coveredTraditional critical illness policies cover 40 illnesses. PruProtect cover:

− 102 on our Primary Serious Illness Cover, and

− 166 on our Comprehensive Serious Illness Cover

• Some providers pay a reduced amount for a limited number of conditionsFor these conditions they may limit their payout to between £12,500 and £25,000. So they could pay less than 12.5% or 25% if your client has a larger sum assured.

• Poor link between severity of illness and payoutMany providers do not recognise the difference in treatments and pay the same payout regardless

− For example, some providers pay the same amount for Mastectomy and Lumpectomy

Why other providers payouts don't go far enoughThe limitations of traditional critical illness policies

Page 19: Pitch Book: Serious Illness Cover

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• Trends in cancer:

– 1 in 2 of us are expected to get cancer at some point in our life

– National screening programmes have meant earlier diagnosis and either less invasive treatments or no treatment at all

• Traditional cover:

– ABI definition is Cancer excluding less advanced cases, meaning that it requires cancer to be advanced

– Other providers only cover early stage cancers in specific areas of the body, and often require treatment

• Why PruProtect?

– We cover early stage cancers in all parts of the body– We are the only insurer to payout on diagnosis of low

grade prostate cancer, the most common cancer in men

– We are the only insurer to cover non-malignant skin cancers of a specified severity

CancerWe cover more cancers than any other UK insurer

Page 20: Pitch Book: Serious Illness Cover

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• Trends in heart disease:– Heart disease is the UK’s biggest killer – Preventative medication has helped to slow the

progression of heart disease

• Traditional cover:– ABI definition requires heart attacks to be of a specified

severity, typical clinical symptoms and ECG changes– Some providers have widened their definitions, but

most still require multiple criteria to be met to qualify for a payout

• Why PruProtect?– We cover all diagnosed heart attacks– It means if troponin levels have reduced by the time of

a positive diagnosis, customers would still qualify for a payout

Heart We cover all heart attacks

Page 21: Pitch Book: Serious Illness Cover

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• Trends in stroke:– There are1.1m stroke survivors in the UK– 1/3rd of strokes lead to only temporary symptoms

• Traditional cover:– ABI definition of stroke requires permanent

neurological deficit – Other providers require either permanent neurological

damage or symptoms to have persisted for 24 hours

• Why PruProtect?– We cover all diagnosed strokes, even if there is no

permanent damage or persisting symptoms

Stroke We cover all strokes

Page 22: Pitch Book: Serious Illness Cover

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• Trends in diabetes:– Over 3m suffer from diabetes in the UK– Diabetes dramatically increases the risk of other

serious illnesses– 80% of type II diabetes cases can be prevented

through lifestyle changes

• Traditional cover:– There is no ABI definition for diabetes– Only two providers cover type I diabetes, and apply

either age restrictions or the requirement for insulin dependence

• Why PruProtect?– We cover diagnosis of type I diabetes in all adults– We uniquely help people to reduce the risk of type II

diabetes through our Vitality programme

Diabetes We cover type I diabetes for adults, and help customers prevent type II

Page 23: Pitch Book: Serious Illness Cover

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Drag picture to placeholder or click icon to add

Improving customer outcomesLikelihood of a claim payout before age 65

Source: Hannover Re UK Life Branch August 20131) Estimates are based on Hannover Re UK Life Branch’s interpretation of general population incidence rates and their estimated view of future

trends. Incidence rates for the general population may be different to those lives that take out life insurance products.2) The market leading critical illness product is a comprehensive one and covers most conditions seen in the market3) Estimates are based on the likelihood of making a claim before age 65.4) Premiums based on PruProtect policy for a non-smoker with £100,000 of Life and SIC cover on 20 year term basis.

Market leading CIC New Primary SIC New Comprehensive SIC

1.3 timesmore likely to claim on Primary SIC vs CIC

Lik

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2 timesmore likely to claim on Comprehensive SIC vs CIC

Lik

elih

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Up to twice as likely to claim on comprehensive

SIC compared to market leading CIC

Page 24: Pitch Book: Serious Illness Cover

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Drag picture to placeholder or click icon to add

Improving customer outcomesLikelihood of a claim payout before age 65

Source: Hannover Re UK Life Branch August 20131) Estimates are based on Hannover Re UK Life Branch’s interpretation of general population incidence rates and their estimated view of future

trends. Incidence rates for the general population may be different to those lives that take out life insurance products.2) The market leading critical illness product is a comprehensive one and covers most conditions seen in the market3) Estimates are based on the likelihood of making a claim before age 65.4) Premiums based on PruProtect policy for a non-smoker with £100,000 of Life and SIC cover on 20 year term basis.

Market leading CIC New Primary SIC New Comprehensive SIC

1.3 timesmore likely to claim on Primary SIC vs CIC

2 timesmore likely to claim on Comprehensive SIC vs CIC

Lik

elih

oo

d o

f cl

aim

fo

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fe

ma

le a

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d 3

0 a

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y 1.6 timesmore likely to claim on Comprehensive SIC vs Primary SIC

1.1 times extra cost of

Comprehensive SIC vs Primary SIC

£23.06 £26.36

Page 25: Pitch Book: Serious Illness Cover

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Drag picture to placeholder or click icon to addOur broad coverage means that we uniquely cover a number of illnesses with our

Comprehensive cover, including:

Some of our unique claims to date

Total Colectomy

Permanent pacemaker insertion

Chronic renal Impairment

Surgical repair of depressed skull fractureSurgical repair of detached retina

Angioplasty(Coronary) or PTCA with or without stent

Acute renal Dialysis

Pulmonary Embolus

Page 26: Pitch Book: Serious Illness Cover

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Drag picture to placeholder or click icon to addAlthough we made two payments to Louise for her illness, she still has cover available if she needs to claim again

• Louise is still protected, even if she were to be diagnosed with a new illness

• If the worse should happen and Louise dies prematurely, her Life Cover offers the peace of mind that her family will be financially supported

Louise’s claims experience

This is a example case study for illustrative purposes only. It has been inspired by our customers

See our claims case study for more

details

Page 27: Pitch Book: Serious Illness Cover

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Our award winning coverIndustry recognition

2009 2010 2011 2012 2013

2007- 2014 2008 - 2014

Page 28: Pitch Book: Serious Illness Cover

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What the experts say

The mistake I made was to develop the policy to pay out on the diagnosis. It should be paid out on severity…

Dr Marius Barnard, Creator of Critical Illness

Of all the covers available Serious Illness Cover makes the most sense, it has the widest base and severity at its heart.

Dr John Delfosse,August 2013

Page 29: Pitch Book: Serious Illness Cover

Serious Illness Cover Booster

Page 30: Pitch Book: Serious Illness Cover

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Traditional critical illness coverSeverity is an after thought with traditional cover

A traditional critical illness policy pays out 100% on most conditions….

…..and has a small number of partial payments

Payo

ut

Conditions covered

Diagrams are only illustrative of how cover works

Page 31: Pitch Book: Serious Illness Cover

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Comprehensive Serious Illness CoverSeverity is fully embedded

Payo

ut

Conditions covered

Serious Illness Cover may not pay as much for some conditions….

…but covers more conditions and is more

likely to payout

Diagrams are only illustrative of how cover works

Page 32: Pitch Book: Serious Illness Cover

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Comprehensive Serious Illness CoverBest of both worlds

Payo

ut

Conditions covered

Diagrams are only illustrative of how cover works

Serious Illness Cover Booster provides a 100% underpin on conditions typically covered by CIC

For certain long term conditions it boosts payments to between 100% and 200%, depending on age at claim

Additional 10% boost for every child named on the policy

Page 33: Pitch Book: Serious Illness Cover

Additional covers and options

Page 34: Pitch Book: Serious Illness Cover

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Minimum Protected AccountThe need to protect your protection

Traditional Critical IllnessCover ends

Claim 1Heart attack

We are living longer and more of us are living with more than one

illnesses

You cannot buy more cover once you’ve made a claim with

traditional cover

Page 35: Pitch Book: Serious Illness Cover

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Drag picture to placeholder or click icon to addWhy Minimum Protect Account?It protects the value of the plan account when customers make a claim, so it means:

– If you have more than one illness, then you’re still covered

– You can claim up to 3 times your original sum assured

Minimum Protected AccountCover for multiple illnesses

Plan Account with MPA at 100%

Claim 1 reduces the Plan Account

Claim 2 reduces the Plan Account

Claim up to 3 times the original level of the cover

David bought a Plan covering £100,000 level Life and Serious Illness Cover with 100% MPA.

Two years later David suffered a heart attack and received a 50% payout under his Serious Illness Cover.

As he had chosen 100% MPA, his cover was topped up to £100,000 with no underwriting or premium increases.

Four years later David suffered a stroke. He received a 100% payout and used the £100,000 to pay off his mortgage and concentrate on his rehabilitation.

His cover topped back up to £100,000 with no underwriting or premium increases. This gave him peace of mind that cover still remains in place to help him and his family in the future.

With a traditional critical illness plan, David would have received an initial £100,000 payout but then his cover would have ended.

Getting replacement cover would have been difficult as many providers would deem him to be uninsurable after the first heart attack.

Page 36: Pitch Book: Serious Illness Cover

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• Cover that pays out if a child becomes seriously ill, to help with the extra costs of travel, treatment, extra tuition and time off work

• Your clients can purchase up to £100,000 extra cover for their children, in addition to the £25,000 included within a PruProtect Plan

• Your clients do not need to have Serious Illness Cover to have this cover

Optional Serious Illness Cover for ChildrenAdditional peace of mind for parents

Vitality Plus unlocks more rewardsChildren also benefit from the Vitality Plus benefits of a parent. E.g. two adults with Vitality Plus and two children with OSICC can claim 4 cinema ticket codes each week

Page 37: Pitch Book: Serious Illness Cover

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• Help protect the value of cover against the effect of inflation

• We will increase cover and premiums each year based on current inflation rates

• Customers can refuse cover increases up to three times in a row

IndexationProtecting the value of your policy against inflation

The value gap

The value gap widens with longer terms

Page 38: Pitch Book: Serious Illness Cover

Get more cover with Vitality Optimiser

Page 39: Pitch Book: Serious Illness Cover

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• Lower premiums: Vitality Optimiser gives an initial discount of up to 40% on protection premiums

• Control: It provides a way to control your premiums each year• +2% for bronze members• +1% for Silver members• No change for Gold members• -1% for Platinum members

• Rewards: Customers also get access to all our reward partners for £3 per month

• Cashback: Customers can also get between £50 and £100 cashback if they engage with Vitality. Joint policies get double cashback.

Vitality OptimiserA new approach to protection

Page 40: Pitch Book: Serious Illness Cover

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Cover Initial total premium

Serious Illness Cover £54.92

+ SIC Booster £60.16

Vitality Optimiser: A case studyUsing Vitality Optimiser to help your customers buy up more cover

*Including the cost of Vitality Plus fee of £3 per month

+ Vitality Optimiser £54.14*

A 30 year old non smoker takes out £200,000 of Primary Serious Illness Cover on an Essentials Plan with a 25 year term.

Get SIC Booster for the price of SIC with

Vitality Optimiser

Engage with Vitality to keep the premiums low

Page 42: Pitch Book: Serious Illness Cover

Serious Illness CoverInnovative cover for a changing world