1. 1 A partner you can trust. Critical Illness – Part 2 Conference 2013 Elite Paul Prosser B.Comm, CFP, RHU Regional Vice-President (Prairies)

2. 2 The elephant, symbol of our 100 years of strength and longevity. Origins Death vs. Critical Illness Perspective Tough Sale? Product Line-Up Sales Idea Agenda

3. 3 Impacting People Every Day In Canada Every 2 minutes someone is diagnosed with cancer Every 7 minutes someone has a heart attack Every 10 minutes someone has a stroke Many will survive. But survival has a cost. $$$$$$$$.

4. 4 CI – A Unique Beginning in 1967 - Dr. Marius Barnard Critical Illness Protection – The ultimate “Gap Filler” “Not because you are going to die, but because you are going to survive!”

5. 5 Dr. Marius Barnard

6. 6 From 1983 To Present – 54 Countries

7. 7 Not because you are going to die... 226,584 Deaths in Canada in 2004 52.4% of all Deaths caused by: Cancer 29.5% Heart Disease 22.9% Source: CBC.ca

8. 8 Because you are going to survive! AgeDeaths per YearPopulationPercentage 25-291,2652,529,2390.05% 30-341,5412,598,2890.06% 35-392,1772,344,8720.09% 40-443,8742,138,8910.18% 45-495,8281,674,1530.35% 50-547,9371,339,9020.59% 55-5910,8781,238,4410.88% 60-6413,2691,190,2171.11% Total46,76915,054,0040.31% Total Population230,13228,120,0650.82% Source: StatsCan

9. 9 Leading Illnesses & Incidence ‒ Cardiovascular disease is the number one preventable cause of death in Canada, but every 7 minutes someone dies from heart disease or stroke that’s one stroke every 10 minutes ‒ More than 50,000 strokes occur in Canada each year...that’s one stroke every 10 minutes ‒ One third of all stroke victims are under the age of 65 ‒ 1 in 2 heart attack victims are under age 65 ‒ 1 in 4 Canadians will contract some form of heart disease Source: Heart & Stroke Foundation

10. 10 Critical Illness – Heart Attack - 1 in 4 Canadians will contract some form of Heart Disease. - 75,000 Canadians will suffer a Heart Attack each year. - The rate of death among patients hospitalized for Heart Attack has decreased by half, from 16% to 8%. - 1 in 2 victims is under age 65. Living with Heart Disease: Age 20 – 491.3% Age 50 – 646.9%

11. 11 Critical Illness – Heart Attack Every 7 minutes…a heart attack! 82% of victims survive their first heart attack 1 in 4 Canadians will develop some form of heart disease during their life 1 of 2 heart attack victims is under age 65 Every year 70,000 Canadians will have a heart attack Source: Stats Canada

12. 12 Critical Illness - Stroke - 50,000 Canadians suffer a Stroke each year. - 75% survive the initial event. - Stroke is the leading cause of neurological disability. - 1 in 3 victims are under Age 65. - 75% of victims are left with a disability:  15% of victims die.  10% recover completely.  25% recover with minor impairment or disability  40% left with moderate to severe impairment  10% require long-term care for severe impairment Source: Heart and Stroke Foundation of Canada

13. 13 Critical Illness – Heart Attack & Stroke 80% of Canadians have at least one risk factor for Heart Disease or Stroke: Smoking Alcohol Physical Inactivity Obesity High Blood Pressure High Blood Cholesterol Diabetes

14. 14 Critical Illness - Cancer Each week in 2009, 3300 Canadians will be diagnosed with Cancer 30% of these new cancer cases will occur in young & middle aged adults (aged 20-59) Cancer incidence is rising in young women aged 20-39 Nearly half of all Canadian males and 40% of females will be diagnosed with cancer at some point in their lives. Source: StatsCan

15. 15 Critical Illness - Cancer An estimated 166,400 Canadians were diagnosed with Cancer in 2008. 1 in 3 Canadians will develop Cancer in their lifetime. Three types of Cancer account for the majority of new cases: Men – Prostate, Lung, Colorectal Women – Breast, Lung, Colorectal Mortality from Cancer is declining for both Men and Women under Age 70.

16. 16 Leading Types of Cancer & Incidence Three leading types of Cancer in males 1. Prostate Cancer – 1 in 7 men will develop prostate cancer 2. Lung Cancer – 1 in 11 men will develop lung cancer 3. Colorectal – 1 in 14 men will develop colorectal cancer Source: StatsCan

17. 17 Three leading types of Cancer in females 1. Breast Cancer – 1 in 9 women will develop breast cancer 2. Lung Cancer – 1 in 16 women will develop lung cancer 3. Colorectal – 1 in 15 women will develop colorectal cancer Source: StatsCan Leading Types of Cancer & Incidence

18. 18 Critical Illness – Cancer, The Greatest Risk 173,800 new cases of cancer (excluding about 75,500 non-melanoma skin cancers) and 76,200 deaths will occur in Canada in 2010. Every 2 minutes…a new diagnosis! Men 90,000 Women 83,900

19. 19 Critical Illness – Cancer in Young Adults - Cancer is the main cause of early death among young adult females: - Almost 2/3 of young adult Cancers occur in females - Breast cancer is the most common. - More young adult females than young adult males are diagnosed with Lung Cancer. - 30% of new Cancer cases will occur in young and middle-aged adults – ages 20 to 59.

20. 20 Critical Illness - Statistics ‒ Of 10 Healthy Males 3 will have a Critical Illness before Age 65. ‒ Of 10 Healthy Females 2.7 will have a Critical Illness before Age 65. Source: www.criticalillnessinsurance.com

21. 21 Critical Illness before Age 65 Critical IllnessIncidencePercentage of Illnesses before Age 65 Critical Illnesses before Age 65 per Year Heart Attack75,000 per Year50%37,500 per Year Stroke50,000 per Year33%16,667 per Year Cancer130,000 per Year35%45,500 per Year Total255,000 per Year137,167 per Year Source: Heart and Stroke Foundation, Canadian Cancer Society Canadians are 3X more likely to be diagnosed with a Critical Illness before Age 65 than to Die!

22. 22 “Everyone will die, but I won’t get sick” 0% 5% 10% 25% 20% 15% Age 35Age 60Age 40Age 45Age 50Age 55 Possibility of death vs. probability of critical illness Male - Before age 65 Source : MunichRe Statistics Statistics

23. 23 Possibility of death vs. probability of critical illness Female - Before age 65 0% 5% 10% 25% 20% 15% Age 35Age 60Age 40Age 45Age 50Age 55 Statistics Statistics Source : MunichRe “Everyone will die, but I won’t get sick”

24. 24 The High Cost of Getting Sick Private nursing (per hour)33 – 55 Treatment at Mayo Clinic (Rochester, Minnesota) Coronary artery bypass; 1-4 vessels, hospital stay 5-7 days74,900 – 90,950 Modified radical mastectomy; one breast, hospital stay 2-3 days23,647 – 28,890 Radical prostatectomy, hospital stay 2-3 days37,664 – 43,870 Radiation therapy for cancer for 6 weeks53,500 – 74,900 Kidney transplant (living donor), hospital stay 5-8 days149,800 – 246,100 Heart transplant, hospital stay 2-4 weeks283,550 – 449,400 Housekeeper (per hour)25 – 30 Home care bed1,000 – 8,000 Home renovations Ramp1,000 – 10,000 Stair lift3,500 – 18,000 Non-Covered cancer treatment drugs20,000 - 65,000 Handicap Van Conversion12,980 – 16,980 Canadian Dollars ($) Costs for treatment at Mayo Clinic have been converted from US dollars to Canadian dollars assuming a conversion rate of $1.07 Canadian to $1.00 US.

25. 25 The Steep Cost of Surviving 151,712 Canadians filed personal Bankruptcy/Consumer proposals in 2009 The average household debt is greater than $90,000. The total debt to disposable income ratio has increased to 145% for 2009. The ratio of consumer debt plus mortgage debt climbed to 127% of disposable income in 2008 Spending and debt have risen much faster than incomes Annual savings are smaller and average net worth is also less.

26. 26 IA Sales Numbers Life Policy Sales ’12- 136,000 policies CI Policy Sales ’12- 19,000 policies Life Policy Sales ’11- 136,000 policies CI Policy Sales ’11- 17,000 policies We sell 8X more Life Insurance policies than Critical Illness policies!

27. 27 Some Perspective

28. 28 ? Who do you know that has suffered: Heart Attack? Life Threatening Cancer? Stroke? ? What would a little bit of money have meant to them? Two Questions?

29. 29 The Price is High Complexity of Product Declines for Claims The Refusal Rate is High Many Cases with Extra Premiums Long Underwriting Periods More difficult underwriting when a Life and CI application is submitted at the same time What makes CI insurance a tough sale ?

30. 30 Average Face Amount - $95,000 per policy ProductAverage Face Amount (per policy) Renewable Term (T-10, T-20) $89,725 Level Pay (T-65, T-75) $96,101 Permanent (T-100) $99,712 Other $105,739 All Guaranteed Premium Rate Products $94,558 2005 Sales Breakdown for Products with Guaranteed Premium Rates Source: Munich Re’s Critical Illness Survey 2006

31. 31 Average Family Income in Canada Median Total Income 2007200820092010 Canada73,42075,88075,32076,950 Nova Scotia66,67069,91070,49072,350 Ontario76,51078,35077,06079,050 Manitoba69,41072,19073,25074,440 Saskatchewan73,83078,83080,08082,230 Alberta89,72094,17091,59093,820 BC71,88074,07072,82073,190 Source: Stats Canada

32. 32 IA Stats – Declined Claims - Approx. 600 claims to date - Approx. 100 claims were invalid Remember CI is a living benefit, claims for death and uncovered illnesses don’t qualify - Approx. 500 valid claims - 56 refusals - Approx. 10%

33. 33 Causes for Denied Claims According to Swiss Re The most common causes for claims denial are: 20% - 90 day exclusion for Cancer 20% - Cancer In Situ 20% - Heart Attack did not meet definition 40% - Misrepresentation Source: Swiss Re - 2001

34. 34 What makes CI insurance a tough sale ? Critical Illness Life Insurance Issued Standard61%79% Issued Extra-Premium13%4% Refused15%9% Not Taken11%8% Average age 35 32

35. 35 Current Techniques for Sales Clients have limited funds…need to take care of their Life Insurance, RRSP, RESP, TFSA, Disability coverage first. Why doesn’t this work? Clients needs & demographics changing Clients risk is living too long not dying too soon.

36. 36 Current Techniques for Sales Need $$ to access healthcare outside of Canada – Wait lists are increasing! Ability to jump the Queue. Why doesn’t this work? Many people don’t want to leave “home” during a period of Critical Illness. To purchase the amount of coverage required – could be prohibitive.

37. 37 Current Techniques for Sales CI provides a magic “pot” of money so you can do “whatever” you want to do with it! Why doesn’t this work? “Anything you want” – does not provide a value proposition. What CI benefits can do is not as clear as what Life Insurance does.

38. 38 Current Techniques for Sales People with $$$ have no need for CI Why doesn’t this work? Wealthy people understand the value of insuring risks. Why use your own money if you can use someone else’s?

39. 39 Current Techniques for Sales Sell CI for the “Investment” component…aka Return of Premium. Why doesn’t this work? Former product design and pricing is not sustainable. The odds of a claim are high. Adding ROP increases the cost – may eliminate potential buyers.

40. 40 IA Product Line-Up Transition – Full Product T10, T20, T75, T100 25 Covered Illnesses Flexible premium options Ages 0-65* Prevention + $10K - $2M face amount * Age at issue varies by term

41. 41 IA Product Line-Up Transition Evolution T100 ROP built in 25 covered illnesses $10K - $2M face amount Transition Simplified Issue T10, T75 Non Medical 4 covered illnesses $10K - $100K face amount

42. 42 IA Excellence Product Line-Up Cancer Guard Guaranteed Issue Non Medical No MIB Up to 6 covered illnesses Up to $100K face amount

43. 43 Simple Sales Process

44. 44