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New Zealand Society of Actuaries Conference, November 20021 Critical Illness Pricing Update Mel Yates GeneralCologne Life Re Australia.

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Presentation on theme: "New Zealand Society of Actuaries Conference, November 20021 Critical Illness Pricing Update Mel Yates GeneralCologne Life Re Australia."— Presentation transcript:

1 New Zealand Society of Actuaries Conference, November 20021 Critical Illness Pricing Update Mel Yates GeneralCologne Life Re Australia

2 2New Zealand Society of Actuaries Conference, November 2002 Agenda Incidences –Big 4 – Trends & Comparison with “Fabrizio & Gratton 1994” –Other conditions including TPD Mortality –Trends in population mortality –Proportion of deaths due to critical illness Life + accelerated critical illness pricing

3 3New Zealand Society of Actuaries Conference, November 2002 Footnotes New basis 2003 v. “Fabrizio & Gratton” 1994 Population incidence and mortality - NOT assured lives Australian data NOT New Zealand Aggregate NOT smoker/non-smoker

4 4New Zealand Society of Actuaries Conference, November 2002 IAA – Trauma Claims 1995-1997 Cancer 46% Stroke 7% Other 20% Bypass 10% Heart Attack 17% MalesFemales Cancer 84% Heart Attack 1% Bypass 1% Stroke 4% Other 10% The Institute of Actuaries of Australia – Report of the Mortality Investigation 1995-1997

5 5New Zealand Society of Actuaries Conference, November 2002 Actual / Expected by cause of claim The Institute of Actuaries of Australia – Report of the Mortality Investigation 1995-1997 EventMalesFemales Cancer66%77% Heart Attack22%5% Bypass Surgery58%42% Stroke29%23% Big 4 combined43%61%

6 6New Zealand Society of Actuaries Conference, November 2002 Actual / Expected by age The Institute of Actuaries of Australia – Report of the Mortality Investigation 1995-1997 AgeMalesFemales 25-34 51% 74% 35-44 40% 55% 45-54 41% 66% 55-64 59% 43% All 43% 61%

7 7New Zealand Society of Actuaries Conference, November 2002 Actual / Expected by age (assured lives) The Institute of Actuaries of Australia – Report of the Mortality Investigation 1995-1997 AgeMalesFemales 25-3451% (0.78)74% (1.06) 35-4440% (0.67)55% (0.70) 45-5441% (0.64)66% (0.86) 55-64 59% (0.87)43% (0.57) All 43% 61% Figures in brackets estimate the A/E ratio after applying an assured lives adjustment to the expected.

8 8New Zealand Society of Actuaries Conference, November 2002 Incidences - Cancer Australian Association of Cancer Registries (AACR) and Australian Institute of Health & Welfare (AIHW) Annual reports of new cancer diagnosis from 1983-98 Excludes in-situ & non-melanocytic skin cancers but includes all melanomas Adjustment for melanomas less than 1.5mm thick –85% at young ages falling to 50% at older ages –Females higher percentages than males – but males rising towards female levels

9 9New Zealand Society of Actuaries Conference, November 2002 Cancer Incidence Ages 25-34 Female Trend +0.9% p.a. Male Trend +1.3% p.a. “Cancer in Australia” - AACR & AIHW

10 10New Zealand Society of Actuaries Conference, November 2002 Cancer Incidence Ages 35-44 Female Trend +0.2% p.a. Male Trend +0.5% p.a. “Cancer in Australia” - AACR & AIHW

11 11New Zealand Society of Actuaries Conference, November 2002 Cancer Incidence Ages 45-54 Female Trend +1.1% p.a. Male Trend –0.2% p.a. “Cancer in Australia” - AACR & AIHW

12 12New Zealand Society of Actuaries Conference, November 2002 Cancer Incidence Ages 55-64 Female Trend +1.3% p.a. Male Trend –1.0% p.a. “Cancer in Australia” - AACR & AIHW

13 13New Zealand Society of Actuaries Conference, November 2002 Cancer Incidence Rates - Males The Institute of Actuaries of Australia – Report of the Mortality Investigation 1995-1997 AgeA/E (IAA 95-97) 2003/1994Future Trend 25-3485%1.121.3% 35-4477%1.050.5% 45-5455%0.98-0.2% 55-6459%0.99-1.1% All66%1.000.2%

14 14New Zealand Society of Actuaries Conference, November 2002 Cancer Incidence Rates - Females The Institute of Actuaries of Australia – Report of the Mortality Investigation 1995-1997 AgeA/E (IAA 95-97) 2003/1994Future Trend 25-3481%1.140.9% 35-4470%1.020.2% 45-5487%1.101.1% 55-6453%1.221.3% All77%1.141.3%

15 15New Zealand Society of Actuaries Conference, November 2002 Heart attack WHO MONICA (Monitoring of Trends & Determinants of Cardiovascular Disease) Project 1985-93 –Average of 3 centres: Newcastle, Perth, Auckland Australian and international data show improvement in the incidence of “first-ever” heart attacks Favourable changes in CHD risk factors –Blood pressure –Smoking –Saturated fat content in diet Project 2% p.a. decline in heart attack incidence rates

16 16New Zealand Society of Actuaries Conference, November 2002 Heart Attack Incidence Rates - Males The Institute of Actuaries of Australia – Report of the Mortality Investigation 1995-1997 AgeA/E (IAA 95-97) 2003/1994Future Trend 25-340.89-2% 35-4415%0.43-2% 45-5428%0.62-2% 55-6448%0.78-2% All22%0.67-2%

17 17New Zealand Society of Actuaries Conference, November 2002 Heart Attack Incidence Rates - Females The Institute of Actuaries of Australia – Report of the Mortality Investigation 1995-1997 AgeA/E (IAA 95-97) 2003/1994Future Trend 25-340.77-2% 35-440.43-2% 45-5410%0.46-2% 55-640.64-2% All5%0.56-2%

18 18New Zealand Society of Actuaries Conference, November 2002 Coronary artery bypass surgery Source: Australian Institute of Health and Welfare (2001) +0.1% p.a. +7.0% p.a. Projected future trend 3.6% p.a.

19 19New Zealand Society of Actuaries Conference, November 2002 Bypass Surgery Incidence Rates - Males The Institute of Actuaries of Australia – Report of the Mortality Investigation 1995-1997 AgeA/E (IAA 95-97) 2003/1994Future Trend 25-340.60+3.6% 35-4471%0.79+3.6% 45-5451%0.84+3.6% 55-6476%0.92+3.6% All58%0.88+3.6%

20 20New Zealand Society of Actuaries Conference, November 2002 Bypass Surgery Incidence Rates - Females The Institute of Actuaries of Australia – Report of the Mortality Investigation 1995-1997 AgeA/E (IAA 95-97) 2003/1994Future Trend 25-341199%7.36+3.6% 35-4475%1.59+3.6% 45-540.97+3.6% 55-640.90+3.6% All42%0.95+3.6%

21 21New Zealand Society of Actuaries Conference, November 2002 Stroke Community based studies for complete case ascertainment Wide variation in international incidence time trends Increased incidence in Denmark and USA Reduced in Finland, Japan and Russia Perth 1995/96 by Jamrozik (1999) -~ 5% improvement p.a. Melbourne 1996/97 by Thrift (2000) ~ less improvement Project 3% p.a. improvement in stroke incidence rates

22 22New Zealand Society of Actuaries Conference, November 2002 Stroke Incidence Rates - Males The Institute of Actuaries of Australia – Report of the Mortality Investigation 1995-1997 AgeA/E (IAA 95-97) 2003/1994Future Trend 25-3410%0.88-3% 35-4418%0.90-3% 45-5440%0.97-3% 55-6465%0.74-3% All29%0.84-3%

23 23New Zealand Society of Actuaries Conference, November 2002 Stroke Incidence Rates - Females The Institute of Actuaries of Australia – Report of the Mortality Investigation 1995-1997 AgeA/E (IAA 95-97) 2003/1994Future Trend 25-3447%1.43-3% 35-4415%0.93-3% 45-5420%0.67-3% 55-6471%0.69-3% All23%0.75-3%

24 24New Zealand Society of Actuaries Conference, November 2002 Big 4 Incidence Rates - Males The Institute of Actuaries of Australia – Report of the Mortality Investigation 1995-1997 AgeA/E (IAA 95-97) 2003/1994Future Trend 25-3451%1.030.1% 35-4440%0.73-0.6% 45-5441%0.81-0.8% 55-6459%0.88-0.5% All 43%0.84

25 25New Zealand Society of Actuaries Conference, November 2002 Big 4 Incidence Rates - Females The Institute of Actuaries of Australia – Report of the Mortality Investigation 1995-1997 AgeA/E (IAA 95-97) 2003/1994Future Trend 25-3474%1.160.1% 35-4455%0.94-0.2% 45-5466%0.940.5% 55-6443%1.000.5% All 61%0.98

26 26New Zealand Society of Actuaries Conference, November 2002 Incidences – Other Conditions Parkinson’s Disease Kidney Failure Dementia Multiple Sclerosis Blindness Organ Transplant Head Trauma Coma Angioplasty Cardiomyopathy Aplastic Anaemia Paralysis Muscular Dystrophy Motor Neurone Severe Burns Deafness Loss of Limbs Loss of Speech Lung Failure Encephalitis Liver Failure Brain Tumour

27 27New Zealand Society of Actuaries Conference, November 2002 Total and Permanent Disability IAA TPD experience 1995-97 –Combined TPD rider and TPD add-on experience GeneralCologne Re TPD experience Increased overlap with Critical Illness Reduced Add-on cost

28 28New Zealand Society of Actuaries Conference, November 2002 TPD Add-on to Trauma Cost

29 29New Zealand Society of Actuaries Conference, November 2002 Comparison of Incidence Rates - Males AgeBig 4 (2003/1994) Others (2003/1994) TPD Add-on (2003/1994) All (2003/1994) 25-341.030.730.600.81 35-440.730.690.860.74 45-540.810.660.900.79 55-640.880.660.920.85 All0.840.670.880.82

30 30New Zealand Society of Actuaries Conference, November 2002 Comparison of Incidence Rates - Females AgeBig 4 (2003/1994) Others (2003/1994) TPD Add-on (2003/1994) All (2003/1994) 25-341.160.760.98 35-440.940.740.450.82 45-540.940.650.570.81 55-641.000.640.780.87 All0.980.670.700.85

31 31New Zealand Society of Actuaries Conference, November 2002 Comparison of Incidence Rates - Males 66%

32 32New Zealand Society of Actuaries Conference, November 2002 Comparison of Incidence Rates - Females 67% 76%

33 33New Zealand Society of Actuaries Conference, November 2002 Mortality Accelerated Dread Disease Pricing: “Dash & Grimshaw” i x + q x (1-k x ) Trends in population mortality q x Trends in proportion of deaths due to dread disease k x

34 34New Zealand Society of Actuaries Conference, November 2002 Mortality Ages 25-34 Trend +0.3% p.a. Trend +0.5% p.a. “Deaths Australia” - ABS Males Females

35 35New Zealand Society of Actuaries Conference, November 2002 Mortality Ages 35-44 Trend +0.0% p.a. Trend –0.8% p.a. “Deaths Australia” - ABS Males Females

36 36New Zealand Society of Actuaries Conference, November 2002 Mortality Ages 45-54 Trend –2.1% p.a. Trend –3.0% p.a. “Deaths Australia” - ABS Males Females

37 37New Zealand Society of Actuaries Conference, November 2002 Mortality Ages 55-64 Trend –2.8% p.a. Trend –3.9% p.a. “Deaths Australia” - ABS Males Females

38 38New Zealand Society of Actuaries Conference, November 2002 Proportion of deaths due to Critical Illness Accelerated Dread Disease Pricing: “Dash & Grimshaw” i x + q x (1-k x ) Mortality improvements due to improved incidence/survival from cancer, heart attack and stroke Mortality from other causes not changed significantly Therefore proportion of deaths (k x ) has reduced Limits the impact of mortality improvement on CI pricing

39 39New Zealand Society of Actuaries Conference, November 2002 Life + Critical Illness Male Aged 45 CI -25% Life -9% Life+CI -21%

40 40New Zealand Society of Actuaries Conference, November 2002 Life + Critical Illness Female Aged 45 CI -23% Life -2% Life+CI -18%

41 41New Zealand Society of Actuaries Conference, November 2002 Accelerated Risk Premiums - Males AgeIncidence i x Life rate q x Life+CI i x + q x (1-k x ) Acc CI Rider i x -k x q x 25-340.811.020.900.82 35-440.741.000.820.74 45-540.790.830.80 55-640.850.760.860.90 All0.820.84 Ratio of 2003 rates to 1994 rates

42 42New Zealand Society of Actuaries Conference, November 2002 Accelerated Risk Premiums - Females AgeIncidence i x Life rate q x Life+CI i x + q x (1-k x ) Acc CI Rider i x -k x q x 25-340.980.99 0.98 35-440.821.040.870.83 45-540.810.880.840.83 55-640.870.850.880.89 All0.850.890.87 Ratio of 2003 rates to 1994 rates

43 43New Zealand Society of Actuaries Conference, November 2002 Summary - 1994 to 2003 Reduced incidence rates Reduction in overall mortality rates Increase in non-CI mortality reduces the impact Overall Life+CI premiums reduced Much of reduction since 1994 already incorporated into companies CI risk rates Assured Lives adjustments to be more tailored

44 44New Zealand Society of Actuaries Conference, November 2002 Summary – 2003 onwards Future trends in incidence rates Males -0.5% p.a., Females +0.3% p.a. Future trend in mortality rates Males –2.5% p.a., Females –2% p.a. Future trend in Life+CI premiums Males –0.5% p.a., Females +0.2% p.a. Future trend in CI Rider cost Males +0.1% p.a., Females +0.6% p.a. Accelerated CI Rider = i x – k x q x Mortality improvements increase the rider cost K x is reducing which increases the rider cost further

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