1. THE SOCIETY OF ACTUARIES IN IRELAND Critical Illness Working Party Neil Guinan (Chair) Gareth Colgan Jeff Davies Alan Grant Tony Jeffery Steve Payne Dave Roberts

2. THE SOCIETY OF ACTUARIES IN IRELAND Content  Introduction  Approach  Analysis of Data  Declined Claims Study  Reserving Survey  What Next?

3. THE SOCIETY OF ACTUARIES IN IRELAND Introduction  Who we are  What we are doing »Terms of reference Compare with relevant tables Analyse for trends Determine if to publish assured lives table –(If so, produce it) Declined claims Survey current reserving bases –Make recommendations

4. THE SOCIETY OF ACTUARIES IN IRELAND History  Number of new critical illness policies sold in Republic of Ireland

5. THE SOCIETY OF ACTUARIES IN IRELAND History  Number of new critical illness policies sold in Republic of Ireland and UK

6. THE SOCIETY OF ACTUARIES IN IRELAND History  Product history in Ireland as established as the UK »16% of population between 20 and 50 covered  IC94 origins »introduction of guaranteed rate contracts required a valuation basis

7. THE SOCIETY OF ACTUARIES IN IRELAND Approach  Use of CMI through Society of Actuaries  Sought support of Offices and Sponsors »Most offices not CMI members »Agreed framework

8. THE SOCIETY OF ACTUARIES IN IRELAND Participants and Sponsors  Participants »Acorn Life »Canada Life »Eagle Star »Friends First »Hibernian (Norwich) »Irish Life ( Irish Progressive ) »Lifetime »New Ireland »Standard Life  Sponsors »Ark Life »Caledonian Life »Scottish Provident »GE Frankona »General & Cologne Re »Gerling Global Re »Munich Re »Swiss Re

9. THE SOCIETY OF ACTUARIES IN IRELAND Basis of Study  Data owned by the Society  Safeguards / Confidentiality  Levels of output »Participants »Sponsors »Everyone else

10. THE SOCIETY OF ACTUARIES IN IRELAND Scope of Analysis  Years covered »1995 to 1999 initially »Ongoing into the future  Size of this investigation versus other investigations »235,000 lives in 1999 data »1,750 claims during the investigation period  Subdivision of data

11. THE SOCIETY OF ACTUARIES IN IRELAND Issues / Caveats  Different benefits and changing products  Treatment of TPD  Treatment of rated lives  Treatment of duplicate lives  Dates used for claim information

12. THE SOCIETY OF ACTUARIES IN IRELAND Lives in force at 31/12/1999  Total Lives235,000 »Male60% »Female40% »Non Smoker72% »Smoker26% »Undifferentiated2% »Accelerated48% »Stand Alone52%

13. THE SOCIETY OF ACTUARIES IN IRELAND Distribution Channel

14. THE SOCIETY OF ACTUARIES IN IRELAND Age Distribution

15. THE SOCIETY OF ACTUARIES IN IRELAND Split by Duration

16. THE SOCIETY OF ACTUARIES IN IRELAND Declined Claims  Investigation in isolation  Tie in with exposure  Office practice - what counts in the data?

17. THE SOCIETY OF ACTUARIES IN IRELAND Reserving Survey - 2000  Method: »Discounted cash flow:9 »Net Premium: 5  Base table: »IC94:9 »Reinsurer rates: 3 »Policyholder rates: 1

18. THE SOCIETY OF ACTUARIES IN IRELAND Reserving Survey - 2000  Margins for offices using IC94: » % of table ranges from 110% to 150% »Median base 135% »Deterioration ranges from 1% to 3% »Median deterioration 2% p.a.  Margins for other offices: »Typically 100% of base table with no deterioration

19. THE SOCIETY OF ACTUARIES IN IRELAND What Next?  We would like your input  Apart from the experience what is to be done?

20. THE SOCIETY OF ACTUARIES IN IRELAND Key Issue 1: New Table Reasons for an Assured Life table  Need for a benchmark  Likely better shape  Immature experience could be misleading  Data so far grouped duration 0,1, and 2+, - now changing.  Conditions vary company to company  IC94 shows that tables WILL be used! Is this good or bad?

21. THE SOCIETY OF ACTUARIES IN IRELAND Key Issue 1: New Table Reasons to stick to population table  Unbiased by insurer  Larger data base  Tables could be out of date very quickly  Difficult to adjust for lots of reasons Definition differences to data First incidence a principle of insurance Effect of selection (+ and -) Socio - economic differences between assured and population.

22. THE SOCIETY OF ACTUARIES IN IRELAND Key Issue 2: Should we recommend Valuation Basis?  Statutory Solvency »Initial Level »Deterioration factor »By Product Type  FCR  IAS

23. THE SOCIETY OF ACTUARIES IN IRELAND What other issues can we contribute to?  How can we look at data to influence future contract design? »Should we? - balance of interests? »What trends should we look at? By duration By year of issue By illness –Medical advances –Genetics –Behavioral changes Lives v amounts

24. THE SOCIETY OF ACTUARIES IN IRELAND What other issues can we contribute to?  Our three issues »Valuation Table »Reserving bases »Product Design  There must be others