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Trauma Product Developments
Robert Kerr
• The Australian Trauma market has developed over the last 30 years
• Competition in Trauma products primarily aimed at increasing conditions covered and the definition of condition.
• This presentation will look across the globe at the development of critical illness / trauma products.
• The impact that standardised definitions have had in these markets and what the impact may be on Australia.
• Ideas from these markets of the product structures and features which could encompass the next generation of products.
History of Critical Illness
First products launched in 1983 in South Africa
Insurer: Crusader LifeReinsurer: Gen ReDeveloper: Dr Marius Barnard
Aim: “ to provide for financial needs following severe or life changing events”
4 Conditions: Heart Attack, Stroke, Cancer, Coronary artery disease requiring surgery (CABG)
1st Claim: 1 December 1984
Development of Trauma
• Developed across the world
– 1986 UK and Ireland
– 1987 Australia
– Late 80s Hong Kong, Singapore, Malaysia, Taiwan
– 1995 China
• Number of conditions have increased in almost all markets
• Driven by competition
• Still 98% claims by top 10 conditions
Standardised Definitions
• Taiwan
• UK
• Singapore
• China
• South Africa
• India
Taiwan - 1989
• First standardisation Taiwan in 1989
– Tariff market with strict pricing and product approval
– Driven by regulators approval process
• Only just been reviewed after 6 year process
• Now includes
• 7 severe illnesses (1 January 2016)
• 7 minor illnesses (1 April 2016)
UK - 1999
• Standardisation was called for by advisors
• Initially included 20 conditions
• Critical Illness must include Cancer, Heart Attack and Stroke
• Definitions are a minimum standard
• Includes defined terms e.g. irreversible, permanent
• Includes model exclusions
UK – 1999 continued
• Updated 2002, 2004, 2006, 2011, 2014
• Aim to include a model definition if 75% of policies include the
condition
• Currently includes 23 conditions
• Most providers offer in excess of 35 conditions and compete on extent of cover provided
Singapore - 2003
• Standardised 37 conditions
• Maximum number of conditions covered 30
• 2014 Review
– Revised definitions
– Removed cap on conditions – competition commission
• Generally limited competition on conditions
China - 2007
• 25 Standardised definitions
• Being reviewed - over 6 years !
South Africa -2011
• First standardisation in 2011
• Updated in 2015
• Aim of standardisation was improve clarity and comparability
• Standardised 4 core conditions at 4 different severity levels.
• Each company must pay 100% at one of the levels and state how much they pay at each level.
• Additional severity and conditions can be covered.
India - 2013
• 11 standardised definition
• 2016 Upgrade
– Revised some definitions
– Added 11 more conditions
Australia - 2017
• 3 standardised definitions
• Cancer, Heart Attack, Stroke
Review Process
• Reviews can be delayed
– Taiwan took over 20 years,
– China is currently reviewing but very slowly
• Singapore – will review once every 3 years
• UK typically every 3 years
• Australia proposed every 3 years
Expectation for Australia
• More conditions will be covered quickly
• Review in at least 3 years
• Will have limited impact on competition
– most providers going beyond the minimum standards.
– Rating houses important
• May go further than conditions
– Exclusions
– Standard terms
TRAUMA DEVELOPMENTS
MULTI PAY
Reinstatement / Buybacks
• Death reinstatement first introduced in South Africa
• Popular in Australia since late 1990s
• Trauma reinstatement launched in Australia in early 2000s
Reinstatement / Buyback
Why?
• Can provide mortality cover even
after they have suffered a Trauma
• Can cover more than one Trauma
• Life insured does not need new evidence of health
Design issues
• Reinstate Death, Trauma or both
• Compulsory or Optional
• What premium to charge - none, previous premium, new
business premium
• What conditions are covered or not covered
• Waiting period before reinstatement
• Restrictions – maximum age, maximum sum assured
Conditions Covered
• Exclusion of claims directly or indirectly caused by or related
to the original event claimed
Conditions Covered
• Groups – exclude
conditions in the same
group
Multi-Trauma
• Claim for multiple traumas
• Benefit 20% of sum assured for each Trauma
• Each Trauma is “Independent”
– One claim per condition
– Minimum 6 months since last diagnosis of same condition
– Not a recurrence of a condition
– Not directly or indirectly caused or related to a condition or symptoms for a condition where a benefit has been paid for.
• Accelerated and Standalone versions
SEVERITY BASED TRAUMA
Severity Based Critical Illness Products
• Benefit payment linked to severity of disease
• Severity level determined by pre-defined objective medical definitions
• Allow multiple claims for different stages of illness progression
• Full financial coverage when battling against unexpected Trauma
• More comprehensive protection vs. standard Trauma product
• More closer reflects need – less “windfall”
what
why
• Originally launched by Discovery in South Africa in
2000
• Common in Singapore, Malaysia, Indonesia where
around 40% of providers offer
• Available in UK, New Zealand and Australia.
Severity Based CI in Southeast Asia
Early stage
cancer
• CIS
• Early prostate
cancers
• Early thyroid cancer
• Papillary micro-
carcinoma of the
bladder
50% or up to
US$80,000,
whichever is
lower
Catastrophic
Cancer
Stage IV cancer with
the presence of
distant metastasis
200%
Major
cancerCancer, excluding
early cancer100%
Cancer coverageSum
AssuredUp-grading
50%
Relapse benefit
After 365 days from remission
Sum insured:Typically not more than US$800,000
Premiums
not guaranteed
Waiting period is 180
days from policy issue
for early cancer and 90
days from policy issue
for cancer
A survival period of 30
days applies
Example of a typical product structure (Cancer )
Intermediatestage
cancer
• Mastectomy due to
CIS of breast
• Prostatectomy due
to T1a or T1b
prostate cancer
100% or up
to
US$160,000,
whichever is
lower
Additional conditions
10-25%
additional
benefit
payout
Severity Based CI in NZ
• 60+ conditions
• 5 categories
• Sum Assured
applies to
each
category
Severity Based in UK
• Serious Illness from Vitality
• 175 conditions covered
• Primary (114 conditions) and
Comprehensive (175 conditions)
Severity Based in UK
• Serious Illness Booster
– Double payment for long term conditions
• Cancer Relapse
– 50% payment boost if recurrence after 12 months in
remission
• Protected Cover
– allows to increase cover back to 100% up to 3 times
– Plus another payment for life cover
– Trauma claim for unrelated condition
Cardiac-Care
• Diagnosis Benefit
• Early Stage (25% SA, max 4 times)
• Moderate Stage (50% SA, max 2 times)
• Severe Stage (100% SA, max 1 time)
• Multiple claims even on same condition
• 1 year waiting period applies (6 months if claiming for different condition)
• Indexation Benefit
• 10% SA increase for every claim free year up to a cap of 50% increase from base sum
assured
• Hospitalization Benefit
• 1% SA per day of hospitalization due to covered illnesses
Underwriting and Claims
• Underwriting may be more comprehensive
– Cover for more minor conditions
– Potential for more anti-selection
• Claims
– More complex claim definitions
– Pressure to pay at higher definition
Pricing
• More Art than Science?
• Need to understand progression of conditions
• Impact of future technology more complicated
– more minor conditions – but fewer major as treated earlier?
• Experience does exist in other markets
• For more basic severity based price can be up to 30% cheaper but varies by age and gender.
• Reviewable rates are helpful
Market Reactions
• Brokers
– Like comprehensive nature
– Dislike complexity and lack of comparability
• Consumers
– Perceived as fairer
– More likely to have a payout
– Same price for cover (or less)
SEVERE TRAUMA
Severe Trauma
• A slightly less complex version of severity
• And a bit more flexible
– to meet needs
– to meet budgets
Building blocks
Severe Trauma
Trauma
Early Trauma
Building blocks
Severe Trauma
Trauma
Early Trauma
Building blocks
Severe Trauma
Trauma
Early Trauma
Example
Stage III Cancer
Stage I Cancer
Carcinoma in situ
Is Modular the next step?
Cancer Heart &
Arteries
Brain and
Nerves
Loss of
Function
Other Health
Events
Severe Trauma
Trauma
Early Trauma
Traditional trauma
Cancer Heart &
Arteries
Brain and
Nerves
Loss of
Function
Other Health
Events
Severe Trauma
Trauma $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000
Early Trauma $100,000 $100,000 $100,000 $100,000 $100,000
Using Severe Trauma to reduce cost
Cancer Heart &
Arteries
Brain and
Nerves
Loss of
Function
Other Health
Events
Severe Trauma $500,000 $500,000 $500,000 $500,000 $500,000
Trauma $500,000 $500,000 $500,000 $500,000 $500,000
Early Trauma $100,000 $100,000 $100,000 $100,000 $100,000
Cancer Only
Cancer Heart &
Arteries
Brain and
Nerves
Loss of
Function
Other Health
Events
Severe Trauma $500,000
Trauma $500,000
Early Trauma $100,000
Bespoke
Cancer Heart &
Arteries
Brain and
Nerves
Loss of
Function
Other Health
Events
Severe Trauma $500,000 $1,000,000
Trauma $250,000 $250,000 $250,000 $500,000 $250,000
Early Trauma $100,000 $100,000 $100,000 $100,000 $100,000
SIMPLE TRAUMA
Key 3
• 3 Critical Illnesses
– Heart Attack
– Cancer
– Stroke
• No Partials
• No Options
• Waiver of premium
http://e1.aig.com/key
Scottish Widows
“Removing complexity will also make
things clearer and simpler for advisers
and clients alike, with no complicated
policy conditions to work out at that all-
important point of claim.”
Cancer in-situ paid where surgery
necessary – for all sites
Combined Alzheimer's, Dementia etc
Unum Simplicity
• Group CI
• 10 most common conditions
• Plus childrens cover
• Benefits – flat cover amount up to ₤60,000
http://online.positiveimagesuk.com/unum/download/UP3284.pdf?5d341c43-2ed1-5362-f04f-58b41870d915
SUMMARY
Summary
• Standardisation of trauma conditions is common
• It has not limited competition
• Competition
– More covered conditions
– More choice and flexibility
– But more complexity
