The 3 rd Younger Members Convention November 2004, The Chesford Grange Hotel, Kenilworth

CI: What are the Risks and How to Manage Them? Grigory Spivak, Gen Re LifeHealth UK

CI: What are the Risks and How to Manage Them? Contents:  Underwriting and claims  Future adverse trends  Definitions  Alternative product design

Benefits and needs Mortality term assurance  Lump sum paid to dependants after death Critical Illness  Lump sum paid upon diagnosis of a life- changing illness  List of illnesses  Definitions  Underwriting, non- disclosure  Claims management

Recent UK experience  Increased number of covered conditions  Weakening definitions:  Competition  Standardisation  Medical advances  Some conditions dropped  Angioplasty  Diabetes  Definitions tightened:  Myocardial infarction  Prostate cancer  TPD own Current UK position  Increased number of covered conditions  Weakening definitions:  Competition  Standardisation  Medical advances  Some conditions dropped  Angioplasty  Diabetes  Definitions tightened:  Myocardial infarction  Prostate cancer  TPD own

Recent UK experience  Poor underwriting  “Silo” mentality  Commercial decisions  Short applications  Increasing benefits levels  Up to £5 million  Business market boom  More stringent underwriting  Maximum ratings  Certain disclosure declined  Maximum benefits capped  Could be £250,000 or £500,000 Current UK position

Recent UK experience  Weakened underwriting position  Genetics lobby  Family history  Smoking  Obesity  Claims control difficulties  TPD  Non-disclosure  Sharp increase in premiums  Duty of disclosure highlighted  Longer application forms  Ombudsman, explanations of definitions  Reinsurers pulling out of the market Current UK position

Claims management: case study 1  A woman made a £500,000 claim for breast cancer surgery. Details of the claim:  Histology report based on a sample tissue  Company CMO confirmed a diagonal scar on her breast  A woman was referred for a surgery by her husband  Both she and her husband work in the hospital  The claim was paid  She also had £35K policy with another company which also paid  One year later: anonymous telephone call received by the insurer:  The tissue provided for testing was actually that of claimant’s mother  Claimant’s husband performed “surgery” to provide physical evidence of scarring

Claims management: case study 2  A professional goalkeeper claimed under “TPD Any” condition  He damaged his leg during a match and his current contract with a club he played for was terminated  Several GP’s reports stated that he was unable to gain employment in any capacity  A few pages from the Internet showed that he joined another football team and even the details of the best save of the day by him during a match  The claim was declined on grounds of attempted fraud

Potential adverse trends  Diagnostics  Screening  NHS Capacity  Treatments  Legal Challenge

Angioplasty Source: British Heart Foundation

The Daily Telegraph: 07/09/04 One in five teenagers show signs of heart disease By David Derbyshire and Roger Highfield 07/09/2004 The couch potato way of life has become so common that one in five young teenagers suffers from the early signs of heart disease and stroke, a disturbing new study has found. Tests on children aged 11 to 14 showed 20 per cent with the sort of blood vessel damage normally associated with cardiovascular disease, regarded as the preserve of adults. Although the children would be unlikely to show symptoms until middle age, the study says poor diet and inactivity are having an impact on health far earlier than many doctors realised.

Definitions  “Catastrophe scenario” is possible  Crucial for both guaranteed and reviewable  Definitions should be future proofed  Plain English  Robustness in 20 years Vs. Plain English

Definitions  Definitions Guide  Care with naming current diagnostic tests  Severity condition within all definitions, objective and measurable  Name of condition, e.g. Life Threatening Cancer  Severity criteria  Stroke: Activities of Daily Living (ADLs)  Heart Attack: Injection Fraction

Catastrophe Scenario  Leukaemia  Micro-strokes and micro-infarctions  Be very careful about definitions

Cancer – current ABI definition Any malignant tumour characterised by the uncontrolled growth and spread of malignant cells and invasion of tissue. The term cancer includes leukaemia and Hodgkin’s disease but the following are excluded:  All tumours which are histologically described as pre-malignant, as non- invasive or as cancer in situ.  All tumours of the prostate unless histologically classified as having a Gleason score greater than 6 or having progressed to at least TNM classification T2N0M0.  All forms of lymphoma in the presence of any Human Immunodeficiency Virus.  Kaposi's sarcoma in the presence of any Human Immunodeficiency Virus.  Any skin cancer other than invasive malignant melanoma.

Cancer definition - comments  Excluding carcinoma in situ does not work as a severity criterion for non-solid cancers such as leukaemia and lymphoma.  Leukaemia cannot be detected using histology. Leukaemia is often diagnosed initially on peripheral blood picture but cytology of bone marrow is usually obtained.  A future very sensitive blood test could detect a few leukaemia cells in blood.

Cancer definition – proposed The presence of a malignant tumour that is characterised by progressive, uncontrolled growth, spreading of malignant cells and invasion and destruction of normal and surrounding tissue. Cancer must be positively diagnosed with histopathological confirmation. The following tumours are excluded:  Leukaemia if there is no generalised dissemination of leukaemia cells in the blood-forming bone marrow or no anaemia in the peripheral blood.  Chronic lymphocytic leukaemia less than RAI Stage 1 or Binet Stage A-I.  Hodgkin’s disease and non Hodgkin’s lymphoma Stage 1 (Ann Arbor classification).

Cancer definition (continued)  Tumours showing the malignant changes in carcinoma in situ (including cervical dysplasia CIN-1, CIN-2 and CIN-3) or which are histologically described as pre-malignant.  All skins cancers, unless that is evidence of metastases or the tumour is a malignant melanoma greater than 1.5mm maximum thickness as determined by histological examination using the Breslow method.  Prostrate cancers which are histologically described as having a Gleason score greater than 6 or having progressed to at least TMN classification T2N0N0 or are of equivalent or lesser classification.  Non life threatening cancers, such as papillary micro-carcinoma of the thyroid or bladder.

Plain English ‘Speak English!’ said the Eaglet. ‘I don't know the meaning of half those long words, and I don't believe you do either!’ Alice in Wonderland, by Lewis Caroll

How else can we manage risk?  Reviewable  Renewable But  Treat customers fairly  Financial Ombudsman: unfair contract terms?

Alternative design: options  Severity criteria, rather than definitions  ADLs, ADWs, Whole Body Impairment  Sum assured differentials

Alternative design: obstacles  Fear of being different  Can’t be called “Critical Illness”  Distribution channels

Positive trends  Ban for smoking in public places  Diagnosis of tumours at pre-cancerous stage  Healthier eating, other healthy habits  Statin drugs

Summary  Underwriting and claims  Trends: positive and negative  Definitions  Alternative product design  Any questions?