1. Critical Illness Protection – Underwriting, Claims and Sales Ideas - Dave Szalkai
CE Information:
ICM: 18854; 2 Life; expiry Sept 29, 2016
CSF: CSF ; 2 PDU in Insurance of Persons; expiry Aug 30, 2016
The Institute : IAS ; 2 CE; expiry Aug 28, 2016
AIC: Pending

3. Agenda 1 2 3 4 CI UW and Claims statistics in Canada Key risk factors
Underwriting CI risk factors 3
Sales Ideas 4

4. Morbidity vs. incidence vs. mortality
Life
Looks at an event that has happened and estimates the resulting mortality implications = Provides a death benefit CI
Estimates the likelihood of occurrence of an event = Provides living benefit

5. Covered conditions 4 conditions: 25 conditions (cont’d):
Cancer (life-threatening)
Coronary artery bypass surgery
Deafness
Heart attack
Stroke (cerebrovascular accident)
Heart valve replacement
EDB ( Early Detection Benefit):
Kidney failure
Coronary angioplasty
Loss of independent existence
Early prostate cancer
Loss of limbs
Ductal breast cancer
Loss of speech
Superficial malignant melanoma
Major organ failure on waiting list
25 conditions:
Major organ transplant
Alzheimer’s Disease
Motor neuron disease
Aortic surgery
Multiple sclerosis
Aplastic anemia
Occupational HIV infection
Bacterial meningitis
Paralysis
Benign brain tumour
Parkinson’s Disease
Blindness
Severe burns
Coma

6. CI claims experience in Canada
The majority of claims (Over 85%) are for the 3 main conditions: Cancer, Heart Attack and Stroke.
This should reinforce the fact having 4 condition rider is covering the majority of claims
When we compare submitted claims versus paid claims, the Others category goes from 15% to 5% which can be explained by the number of claims that are submitted for conditions that are not covered by the policy
Source: Munich Re 2009 CI Survey.

7. Denial of CI claims experience in Canada
20% of claims are denied but the % could me much lower if we exclude some of the reasons for denial. The approval rate would increase to 90% if we consider the categories of Definition not fully met, condition claimed is not covered, and no response from claimant as claims that should not have been submitted.
Advisors need to play a role with their clients to help them understand their policy and prevent disappointment
Source: Munich Re 2009 CI Survey.

8. Split by top cancer claims
Source: Munich Re 2006 CI Survey same results in the 2009 survey.

9. Claims Statistics at ivari
Critical Illness Introduced in 2012
33 claims in total, 31 of them paid out
23 cancer related, 8 heart related
Average age of claimant 39 years old
Youngest claimant 29 years old

10. A real and growing problem…

11. Experience by gender CI claims CI coverages in force Males 55% Females
45%
CI coverages in force
Males
54%
Females
46%
Source: Munich Re 2006 CI Survey

12. Underwriting focus: Anti-selection
What isn’t the applicant telling you?
Anti-selection is always a concern for Living Benefits
What is the client not telling us?

13. Product design can reduce anti-selection
30-day survival period
Importance of this feature cannot be over-emphasized
90-day moratorium period
Occurrence of event within waiting period very likely an indication of anti-selection, and thus recurrence of the event (e.g. cancer)

14. Underwriting focus: Parameters
Minimum rating
+25 (125%)
Maximum rating
+150 (250%)
Use of exclusions
Credits available for certain impairments
Minimum flat extras of $1.00/1000
Maximum flat extras of $ 12.50/1000
No table waiving programs
Same applicant may have different assessment for life and CI policies
May be approved for the 4-conditions but declined for 25-conditions

15. Medical exclusions Core conditions: Lymphomas Uninvestigated history
Not appropriate for:
Core conditions:
Cancer
MI (Myocardial infarction) (Heart attack)
Stroke
Bypass
Kidney failure
Transplant
Lymphomas
Uninvestigated history

16. Sources of information
Application form
Agent’s report
Medical Information Bureau (MIB) report
Attending Physician’s Statement (if obtained)
Financial information/inspection reports
Information contained in existing inforce policies with the company
Exam and laboratory tests

17. Critical information Have any covered events already occurred?
Risk factors
Smoking, alcohol, driving, occupations, avocations
Family history
Details of all medical and alternative medical consultations
Total CI inforce and planned

18. Family history: Risk factor
Early diagnosis (prior to age 60) in a family member is always significant
Focus on the age at onset of the illness in the family members – not the age at death
Family history cancer:
Colorectal - more than one family member with member being younger or equal to age 50
Ovarian cancer - one family member where relative is older than age 50
Family history diabetes:
Applicant’s age 20 to 59 where two first-degree relatives have diabetes
 Family history heart disease:
Has the insured underwent investigation including ECG and echo if aged between 30-40

19. Smoking vs. non-smoking risk
Product definition
Re-test
Cigars

20. Trends in insurance test results
Tobacco use – Canada
50% of population
19% of population
1965
2005
Male
22%
Female
16%
WHO 2007

21. Trends in insurance test results
CANADA – ALL COTININE (nicotine) 2007
British Columbia
9.7%
Ontario
13%
Quebec
17%
Northwest Territories, Saskatchewan
23%

22. Risk factors Tobacco use is a significant risk factor
Smoking
Tobacco use is a significant risk factor
Tobacco use is heavily implicated in the development of many of the diseases covered by Critical Illness

23. Taking the risk
A CI Underwriter’s best friend:
Thoughtfully created medical questions on the application
An APS with clinical notes, including all tests and specialists’ reports
Clear description of covered conditions in the contract 1
ACCEPT 2
RATE 3
EXCLUDE 4
DECLINE

24. Your next step?
Underwriting tips
Salesperson is initial underwriter – Wear your preferred hat
Beware of the following:
CI more like preferred with about 60% standard
Family history and risk factors are extremely important for top 4 conditions:
Cancer
MI (myocardial infarction) (heart attack)
Stroke
CABG (coronary artery bypass graft)
Risk factors such as cholesterol, hypertension, DM (diabetes mellitus)…
Caution about anti-selection – rescind
Anti-selection and non-disclosure are high
Expect more APS’s than life at lower amount

25. Sales Ideas

26. Translation of Objections
1. IT CAN WAIT, LET’S DO IT LATER
“What I am trying to tell you is that throughout our conversation there has not been a motivating factor compelling enough for me to truly believe there is a NEED so I am not going to take any action.”
2. I NEED TO THINK ABOUT IT
Really there is 0% chance I am walking out of here and going to give this some serious thought, you will probably me or call me about it at which time I will tell give you one of the other objections listed here.
3. I NEED TO TALK TO MY SPOUSE
Although we make decisions together, this is a great way for me to pass off my decision making ability to my partner and use them as a reason we are not going to proceed.
4. IT IS TOO EXPENSIVE
I just bought a new car I pay $500 a month for, the Iphone7 for $750 and I am planning my next vacation. So it’s not that it is too expensive, it is that you haven’t shown me the NEED of this solution.

28. LIVING TOO LONG
MARKET CRASH
PREMATURE DEATH
ILLNESS
INJURY

29. LIFE EVENTS
CAR ACCIDENT
HOUSE FIRE
HEART ATTACK
CANCER 3 6 9 10

30. THE WARRANTY All machines break down over time.
“First thing you say when it breaks…Was it under warranty, I don’t want to pay the cost to fix it?”
A car will last on average 7-10 years.
A Refrigerator will last on average 8-10 years.
So if I ask you about the human body, how long will that last?
If we are concerned about the out of pocket costs of our cars and appliances, would it not make sense to but a Warranty on yourself?

31. WHICH JOB? $75,000 $74,000 $0 TAX FREE $100,000 Tax Free
Job “A” OR Job “B”
$75, $74,000
$0 TAX FREE
$100,000 Tax Free

33. What would you rather lose?OR

34. BUT I HAVE GROUP INSURANCE…
POOR BOY PARACHUTE
Opens 50% of the time you jump
Less Expensive
You only have it while working for your company, if you quit, you jump without it
RICH BOY PARACHUTE
Opens 100% of the time
More Expensive
You always have it when you jump

35. “An objection is not a rejection, it is simply a request for more information”

36. Possible Answers to Objections
1. IT CAN WAIT, LET’S DO IT LATER
“Based on what we discussed and what you told me is important, this would leave a major gap in coverage and you may not have it when you need it most. Is there something preventing you from proceeding?
2. I NEED TO THINK ABOUT IT
The insurance company needs to as well. So while you are thinking, let’s do an application and see what type of offer we can secure and you can decide what to take then.
3. I NEED TO TALK TO MY SPOUSE
Is there something specific you would like me to outline for your spouse? Is there a certain concern you believe your spouse would have with you making the decision to protect your family?
4. IT IS TOO EXPENSIVE
Based on what you told me, there is a need. Price we can work on, so let’s take a look at how we can alter the coverage to fit your budget.

39. This presentation is for advisor use only
This communication is published by ivari with material obtained from a number of third-party sources and is intended for advisor use only. Any information contained in this presentation is intended for general information purposes only and should not be considered specific or personal investment, insurance, estate planning, legal or tax advice or a solicitation to purchase insurance. While reasonable efforts have been made to ensure that the contents of this presentation have been derived from sources believed to be reliable and accurate at the time of publication, ivari does not warrant the accuracy or completeness of the information contained herein. Examples given in this presentation are for illustration purposes only. The specific facts and circumstances of each case will differ from client to client. Neither ivari, nor its affiliates, officers, employees or any other person accepts any liability whatsoever for any direct, indirect or consequential loss arising from any use or reliance on the information, general strategies or opinions contained herein. No one should act upon the information or examples without a thorough examination of their legal and tax situation with their own professional advisors based on the facts of their specific case.
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