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Trauma Product Developments
Robert Kerr
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• 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.
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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
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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
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Standardised Definitions
• Taiwan
• UK
• Singapore
• China
• South Africa
• India
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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)
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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
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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
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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
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China - 2007
• 25 Standardised definitions
• Being reviewed - over 6 years !
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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.
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India - 2013
• 11 standardised definition
• 2016 Upgrade
– Revised some definitions
– Added 11 more conditions
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Australia - 2017
• 3 standardised definitions
• Cancer, Heart Attack, Stroke
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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
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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
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TRAUMA DEVELOPMENTS
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MULTI PAY
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Reinstatement / Buybacks
• Death reinstatement first introduced in South Africa
• Popular in Australia since late 1990s
• Trauma reinstatement launched in Australia in early 2000s
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Reinstatement / Buyback
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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
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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
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Conditions Covered
• Exclusion of claims directly or indirectly caused by or related
to the original event claimed
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Conditions Covered
• Groups – exclude
conditions in the same
group
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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
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SEVERITY BASED TRAUMA
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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
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• 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.
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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
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Severity Based CI in NZ
• 60+ conditions
• 5 categories
• Sum Assured
applies to
each
category
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Severity Based in UK
• Serious Illness from Vitality
• 175 conditions covered
• Primary (114 conditions) and
Comprehensive (175 conditions)
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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
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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
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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
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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
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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)
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SEVERE TRAUMA
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Severe Trauma
• A slightly less complex version of severity
• And a bit more flexible
– to meet needs
– to meet budgets
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Building blocks
Severe Trauma
Trauma
Early Trauma
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Building blocks
Severe Trauma
Trauma
Early Trauma
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Building blocks
Severe Trauma
Trauma
Early Trauma
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Example
Stage III Cancer
Stage I Cancer
Carcinoma in situ
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Is Modular the next step?
Cancer Heart &
Arteries
Brain and
Nerves
Loss of
Function
Other Health
Events
Severe Trauma
Trauma
Early Trauma
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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
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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
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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
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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
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SIMPLE TRAUMA
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Key 3
• 3 Critical Illnesses
– Heart Attack
– Cancer
– Stroke
• No Partials
• No Options
• Waiver of premium
http://e1.aig.com/key
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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
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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
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SUMMARY
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Summary
• Standardisation of trauma conditions is common
• It has not limited competition
• Competition
– More covered conditions
– More choice and flexibility
– But more complexity
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