the society of actuaries in ireland critical illness working party neil guinan (chair) gareth colgan...

THE SOCIETY OF ACTUARIES IN IRELAND

Critical Illness Working PartyNeil Guinan (Chair)

Gareth Colgan

Jeff Davies

Alan Grant

Tony Jeffery

Steve Payne

Dave Roberts


Content

Introduction Approach Analysis of Data Declined Claims Study Reserving Survey What Next?


Introduction

Who we are What we are doing

» Terms of reference• Compare with relevant tables

• Analyse for trends

• Determine if to publish assured lives table– (If so, produce it)

• Declined claims

• Survey current reserving bases– Make recommendations


History Number of new critical illness policies sold in Republic of Ireland

0

10000

20000

30000

40000

50000

60000

70000

1995 1996 1997 1998 1999 2000


History Number of new critical illness policies sold in Republic of Ireland and UK

0

100000

200000

300000

400000

500000

600000

700000

800000

1995 1996 1997 1998 1999 2000

Republic of Ireland UK


History

Product history in Ireland as established as the UK» 16% of population between 20 and 50 covered

IC94 origins» introduction of guaranteed rate contracts

required a valuation basis


Approach

Use of CMI through Society of Actuaries Sought support of Offices and Sponsors

» Most offices not CMI members» Agreed framework


Participants and Sponsors

Participants» Acorn Life

» Canada Life

» Eagle Star

» Friends First

» Hibernian (Norwich)

» Irish Life (Irish Progressive)

» Lifetime

» New Ireland

» Standard Life

Sponsors» Ark Life

» Caledonian Life

» Scottish Provident

» GE Frankona

» General & Cologne Re

» Gerling Global Re

» Munich Re

» Swiss Re


Basis of Study

Data owned by the Society Safeguards / Confidentiality Levels of output

» Participants» Sponsors» Everyone else


Scope of Analysis

Years covered » 1995 to 1999 initially» Ongoing into the future

Size of this investigation versus other investigations» 235,000 lives in 1999 data» 1,750 claims during the investigation period

Subdivision of data


Issues / Caveats

Different benefits and changing products Treatment of TPD Treatment of rated lives Treatment of duplicate lives Dates used for claim information


Lives in force at 31/12/1999

Total Lives 235,000

» Male 60%» Female 40%

» Non Smoker 72%» Smoker 26%» Undifferentiated 2%

» Accelerated 48%» Stand Alone 52%


Distribution Channel

Direct Sales38%

IFA37%

Other4%

Unknown1%

Bancassurance20%


Age Distribution

21-3026%

31-4045%

41-5023%

51-605%

61-700%

16-201%


Split by Duration

25%

18%

14% 14%

12%

9%

5%

1% 1% 1% 1%

0%

5%

10%

15%

20%

25%

30%

0 1 2 3 4 5 6 7 8 9 10+


Declined Claims

Investigation in isolation Tie in with exposure Office practice - what counts in the data?


Reserving Survey - 2000

Method:» Discounted cash flow: 9» Net Premium: 5

Base table:» IC94: 9» Reinsurer rates: 3» Policyholder rates: 1


Reserving Survey - 2000

Margins for offices using IC94:» % of table ranges from 110% to 150%» Median base 135%» Deterioration ranges from 1% to 3%» Median deterioration 2% p.a.

Margins for other offices:» Typically 100% of base table with no

deterioration


What Next?

We would like your input Apart from the experience what is to be

done?


Key Issue 1: New TableReasons for an Assured Life table

Need for a benchmark Likely better shape Immature experience could be misleading Data so far grouped duration 0,1, and 2+, -

now changing. Conditions vary company to company IC94 shows that tables WILL be used!

• Is this good or bad?


Key Issue 1: New TableReasons to stick to population table

Unbiased by insurer Larger data base Tables could be out of date very quickly Difficult to adjust for lots of reasons

• Definition differences to data• First incidence a principle of insurance• Effect of selection (+ and -)• Socio - economic differences between

assured and population.


Key Issue 2: Should we recommend Valuation Basis?

Statutory Solvency» Initial Level

» Deterioration factor

» By Product Type

FCR IAS


What other issues can we contribute to? How can we look at data to influence future

contract design?» Should we? - balance of interests?» What trends should we look at?

• By duration• By year of issue• By illness

– Medical advances– Genetics– Behavioral changes

• Lives v amounts


What other issues can we contribute to?

Our three issues» Valuation Table» Reserving bases» Product Design

There must be others

the society of actuaries in ireland critical illness working party neil guinan (chair) gareth colgan...

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