Speaker Name & Country :

Topic:

Madhu Sridharan and Barry Hewett

Munich Re Singapore

A Health Check of Critical Illness Risks

Agenda

Critical Illness Product Objective

Trends Affecting Critical Illness Products
Product Developments
Knowledge Gap
Medical Advances
Ensuring Sustainability

Agenda

Critical Illness Product Objective

Trends Affecting Critical Illness Products
Product Developments
Knowledge Gap
Medical Advances
Ensuring Sustainability

Critical Illness Product Objective

Provide an appropriate insurance benefit to indemnify the insured for out-ofpocket expenses which are associated with a critical illness condition and which
are not covered by other insurance products in the market with broader
coverage
This hasnt changed since the first CI product

Critical condition being CABG

To provide for the cost of CABG (due to legislated limits on health insurance)
Cover amount set at the shortfall
Acceleration of life cover (not an additional payment)
4

Critical Illness Product Objective

Provide an appropriate insurance benefit to indemnify the insured for out-ofpocket expenses which are associated with a critical illness condition and which
are not covered by other insurance products in the market with broader
coverage
Key features of insurance
Uncertain (contingent) event
Financial loss
Pooling of risk

Agenda

Critical Illness Product Objective

Trends Affecting Critical Illness Products
Product Developments
Knowledge Gap
Medical Advances
Ensuring Sustainability

Trends Affecting Critical Illness Products

Product developments
Covered conditions
Benefit provided vis--vis financial loss
Pooling of risks

Reduced underwriting
Medical advances

Focus on early detection and preventative action (screening programmes)

Genetic profiling
Diagnostic technology
Advanced treatments
7

Agenda

Critical Illness Product Objective

Trends Affecting Critical Illness Products
Product Developments
Knowledge Gap
Medical Advances
Ensuring Sustainability

Product Developments
Covered conditions
Ever expanding list of covered conditions

Product Developments
AIDS due to Blood Transfusion
AIDS due to Occupational Accident
Alzheimers Disease
Amputation of Feet due to Complication from Diabetes
Angioplasty
Aplastic Anaemia
Bacterial Meningitis
Benign Brain Tumour
Blindness
Cancer
Carcinoma-In-Situ
Chronic Adrenal Insufficiency (Addisons Disease)
Chronic Relapsing Pancreatitis
Coma
Coronary Artery Bypass Surgery
Creutzfeldt-Jacob Disease (Mad Cow Disease)
Dissecting Aortic Aneurysm
Ebola
Elephantiasis
Encephalitis
End Stage Liver Disease
End Stage Lung Disease
Fulminant Hepatitis
Heart Attack
Heart Valve and Structural Surgery
Idiopathic Dilated Cardiomyopathy
Loss of Hearing

Loss of Speech
Major Burns
Major Head Trauma
Major Organ Transplant (Bone Marrow Transplant)
Major Organ Transplant (Heart, Kidney)
Major Organ Transplant (Liver, Lung, Pancreas)
Motor Neuron Disease
Multiple Sclerosis
Muscular Dystrophy
Myasthenia Gravis
Necrotising Fasciitis (Flesh Eating Disease)
Paralysis
Parkinsons Disease
Poliomyelitis
Primary Pulmonary Arterial Hypertension
Progressive Systemic Sclerosis
Renal Failure
Rheumatoid Arthritis
Severance of Limbs
Severe Asthma
Severe Osteoporosis
Stroke
Surgery to Aorta
Systemic Lupus Erythematosus
Terminal Illness
Vegetative State

10

Product Developments
What does this product cover?
Major conditions (3)
Cancer, Myocardial Infarction, Renal Failure

Surgeries (8)
5 heart related and 3 major organ transplants

ADL Based (23)

Mostly motor neuron related, loss of faculties

Minor conditions (19)

Uncommon illnesses or negligible financial loss or covered by H&S
A simpler product covering the following would meet the purpose
a) three major conditions
b) a benefit on short term inability to perform ADLs and
c) a permanent inability to perform ADLs

11

Product Developments
Covered conditions
Ever expanding list of covered conditions

Benefits provided vis--vis financial loss

Windfall benefits on minor conditions

12

Product Developments
Have Critical Illness Products become a lottery?
A study of claims where CI and DI were both paid
100%
90%

Less than 1 week off work

80%
70%

Average Claim Amount

$106,000

1-4 weeks off work

60%
50%

Average Claim Amount

$ 93,000

40%
30%

More than 4 weeks off work

20%
10%
0%

13

Product Developments
Covered conditions
Ever expanding list of covered conditions

Benefits provided vis--vis financial loss

Windfall benefits on minor conditions
Tiered benefits
Multiple benefits (some accelerate the major conditions and some are paid after
an inter-claim waiting period)

14

Product Developments
Case Study
Korean Cancer Products

15

Product Developments
During Reduced Benefit Period

After Reduced Benefit Period

Regular Cancer

50%

100%

Breast

20%

40%

Genital

20%

40%

CIS

10%

20%

BLT

10%

20%

Other Skin Cancer

10%

20%

Thyroid Cancer

10%

20%

Colon

50%

100%

Prostate

50%

100%

Liver

56%

112%

Lung

56%

112%

Stomach

50%

100%

Other Specific Cancer

56%

112%

Gallbladder etc

50%

100%

HMEC

66%

132%

Regular Cancer

50%
16

100%

Product Developments
Anti-selection after Reduced Benefit Period
140.0%

120.0%

100.0%

80.0%

60.0%

40.0%

20.0%

0.0%
1

4
100% SA

17

Product Developments
Impact of windfall benefits on experience
140.0%

120.0%

100.0%

80.0%

60.0%

40.0%

20.0%

0.0%
1

4
100% SA

20% SA

18

Product Developments
Covered conditions
Ever expanding list of covered conditions

Benefits provided vis--vis financial loss

Windfall benefits on minor conditions
Tiered benefits
Multiple benefits (some accelerate the major conditions and some are paid after
an inter-claim waiting period)
Extremely complex products making the products close to buying lottery.

19

Product Developments
Case Study
In 2014 a life assured (Mr X) submitted a claim for prostate cancer:
5% of prostate infiltrated by carcinoma
Gleason score of 6
PSA of 2.9 ng/ml

Claim decision: 100% of Sum Assured payable

Radical prostatectomy performed

In 2016 Mr Xs brother (Mr Y) also submitted a claim for prostate cancer:

15% of prostate infiltrated by carcinoma
Gleason score of 7
PSA of 4.9 ng/ml

Claim decision: 5% of Sum Assured payable

Radical prostatectomy performed

20

Product Developments
Case Study (cont.)
Based on the size of the tumours, Mr Xs condition (100% payout) was categorised
as T2N0M0, while Mr Ys condition (5% payout) was categorised as T1N0M0.
Diagnosed Condition
Prostate cancer that has progressed to at least T1N0M0

Benefit Percentage
5%

Prostate cancer T2N0M0

100%

Prostate cancer stage III or IV

100%

Would the average policyholder understand the subtleties of cancer classifications?

Does added complexity really make a product more marketable?
Do either of these conditions involve long-term costs not covered by medical plans?
21

Product Developments
Pooling of risks:
Historically, one product for all (target market controlled through distribution)
Products that are tailor made to chosen target groups
Female CI, Juvenile CI, Diabetic CI

Trends in cafeteria type products that allow policyholders to choose the cover
conditions
Do we have robust underwriting and pricing approaches to manage such risks?
By offering more choice, are we opening the doors for anti-selection?

22

Agenda

Critical Illness Product Objective

Trends Affecting Critical Illness Products
Product Developments
Knowledge Gap
Medical Advances
Ensuring Sustainability

23

Knowledge Gap
Two conflicting trends:
In many markets, there is focus on easy sales (with pressure to shorten the
underwriting questionnaires and reduce the evidence required)
Genetic profiling and home diagnostic kits are increasingly attainable

Applicants therefore have access to more health information, while

insurers have access to less
This widening knowledge gap provides increased opportunity for
antiselection exacerbated by the availability of pick your disease
covers
24

Knowledge Gap

25

Knowledge Gap

26

Knowledge Gap
Applicants (or close family members) of applicants may have been
genetically profiled, demonstrating a genetic predisposition to a
particular condition
Despite product complexity and additional consumer choice, insurers
are asking fewer direct health questions and may even be barred from
asking about genetic tests
Without non-disclosing, applicants are able to select and secure the
product under which an individual with their genetic profile is most likely
to claim.
27

Knowledge Gap
Case Study
In 2012, a mother was genetically profiled during pregnancy and was shown to have
a genetic disposition to diabetes. On birth, a DNA test of the childs chord-stem
blood confirmed the same genetic abnormality and doctors recommended ongoing
monitoring of the childs condition.
Shortly after receiving this information, a critical illness policy was taken out on the
child.
In 2015, the child was formally diagnosed with Type 1 Diabetes Mellitus (in
accordance with the policys definition) and a claim was submitted.

28

Knowledge Gap
Case Study (cont.)
The insurance company was able to decline this claim, but only because of a
question on the application form concerning whether the life assured was awaiting
test results. The company was able to confirm that, at the time of application, test
results for diabetes were indeed being awaited and there had been non-disclosure.
Is such a question included on all Asian Critical Illness application forms for the
products currently being sold? Will it continue to be asked in the future?

29

Knowledge Gap
Beware:
Where incontestability clauses limit the insurers ability to void policies and decline
claims, any move to reduce the actual medical evidence collected at underwriting
stage adds hugely to the risk of uncontrolled claims.
In some countries, despite the obvious and intentional non-disclosure, it might have
been impossible to decline this claim due to incontestability legislation.

30

Agenda

Critical Illness Product Objective

Trends Affecting Critical Illness Products
Product Developments
Knowledge Gap
Medical Advances
Ensuring Sustainability

31

Medical Advances
Diagnostic advances:
Less invasive / more cost-effective techniques
Earlier detection (screening programmes)
Detection of less severe conditions (not truly critical)
Diagnostic requirements in the definitions cease to be current

Advances in treatment:
Previously incurable conditions may become readily curable (not truly critical)
Less invasive surgical techniques
May be an earlier intervention (not truly critical, higher incidence) or
May replace existing techniques (definitions cease to be current)
32

Medical Advances
Case Study
Open Heart Surgery

Transcatheter Aortic Valve Implantation (TAVI)

33

Medical Advances
Case Study
Open Heart Surgery
Up until 5 years ago, surgical valve
replacement was the only therapeutic option
In 3060% of elderly patients the risks of
surgery outweighs the benefits

Transcatheter Aortic Valve Implantation (TAVI)

2002:
2006:
2010:
2011:
2012:

First animal experiments

First clinical results in (Germany)
TAVI vs. medical therapy in inoperable patients
TAVI vs. open surgery in high-risk patients
TAVI (self-expanding bioprosthesis) vs. medical
therapy in inoperable patients
2014: TAVI (self-expanding bioprosthesis) vs. open
surgery in patients at increased risk

Y Boudjemline et al: "Percutaneous implantation of a valve in the descending aorta in lambs" Eur Heart J 2002: 23:10451049; E Grube et al.: "Perc. Implantation of the
CoreValve Valve Prosthesis in High-Risk Pts. With Aortic Valve Disease" Circ. 2006;114:1616-1624 ; MB Leon et al.: "Transcatheter Aortic-Valve Implantation for Aortic
Stenosis in Patients Who Cannot Undergo Surgery" NEJM 2010; 21;363:1597-6073; Smith CR et al.: Transcatheter versus surgical aortic-valve replacement in high-risk
patients N Engl J Med 2011;364:2187-98; Popma JJ et al. Transcatheter aortic valve replacement using a self-expanding bioprosthesis in patients with severe aortic stenosis
at extreme risk for surgery. J Am Coll Cardiol 2014; Adams DH et al.: Transcatheter Aortic-Valve Replacement with a Self-Expanding Prosthesis NEJM 2014;370:1790-8.

34

Medical Advances
Case Study
New TAVI devices reduce mortality and result in fewer complications compared to
open heart surgery
In the future, TAVI is expected to become the standard procedure

35

Medical Advances
Case Study
Customer needs
heart valve surgery

Customer buys
CI policy

Policy
terminates

Open Surgery

100%

and is
not
covered (?)

50%

Transcatheter
years

0%
0

10

15

20
36

Medical Advances
Case Study
Heart Valve Surgery
The actual undergoing of open heart surgery to replace or repair heart valve
abnormalities. The diagnosis of the heart valve abnormality must be supported by
cardiac catheterization or echocardiogram and the procedure must be considered
medically necessary by a consultant cardiologist appointed by the Company.

37

Medical Advances
Case Study
New TAVI devices reduce mortality and result in fewer complications compared to
open heart surgery
In the future, TAVI is expected to become the standard procedure
To future-proof the product, should TAVI be explicitly covered in the definition of
Heart Valve Surgery?
TAVI is already increasing the incidence of aortic valve procedures in elderly
patients (over age 70)
What is the cost of future-proofing the definition in this way?
38

Agenda

Critical Illness Product Objective

Trends Affecting Critical Illness Products
Product Developments
Knowledge Gap
Medical Advances
Ensuring Sustainability

39

Ensuring Sustainability
Outcome of the Health Check Health Report
COMPLEX PRODUCTS

WINDFALL BENEFITS

ASYMMETRY OF INFORMATION

EARLY DETECTION AND OVER DIAGNOSIS

MEDICAL ADVANCES

Applicants and policyholders know more about

their health status than the insurers

Are these critical enough to warrant an

insurance payout?
Impact on product design

Early detection and changing medical

procedures; Question on future-proofing
definitions
40

Ensuring Sustainability
Develop products that
Are easy to understand, meet a definite financial need of the customer and do
not pay windfall benefits

Sound risk management through

Simple product structures, appropriate underwriting and claims practices, robust
monitoring of emerging experience

Future-proof products by
Introducing flexible definitions
Not guaranteeing rates

41

Speaker Name & Country :

Topic:

Madhu Sridharan and Barry Hewett

Munich Re Singapore

A Health Check of Critical Illness Risks