Transcript Canadian Institute of Actuaries L’Institut canadien des

Canadian
Institute
of
Actuaries
L’Institut
canadien
des
actuaires
2007 Annual Meeting ● Assemblée annuelle 2007
Vancouver
2007 Annual Meeting
Assemblée annuelle 2007
IP-5
LTC Insurance
The Beginnings of a Market in Canada
2007 Annual Meeting
Assemblée annuelle 2007
Long Term Care Insurance
Saul Gercowsky
AVP & Pricing Actuary, Living Benefits
Manulife Financial
June 28, 2007
2007 Annual Meeting
Assemblée annuelle 2007
Agenda
•
•
Past Sales
Future Potential
Source: Statistics Canada, LIMRA
In-Force
2007 Annual Meeting
Assemblée annuelle 2007
LTCI In-Force in Canada
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
1999
2000
2001
Lives
Source: LIMRA
2002
2003
2004
Premiums ($000s)
2005
2006
Sales
2007 Annual Meeting
Assemblée annuelle 2007
LTCI Sales in Canada
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
1999
2000
2001
Lives
Source: LIMRA
2002
2003
2004
Premiums ($000s)
2005
2006
2007 Annual Meeting
Assemblée annuelle 2007
Why LTCI?
•
In 2006, almost 2.3 million seniors
had long-term health conditions.
•
Asset and income protection
Quality and choice of care
Avoid being a burden on family
•
•
Source: Statistics Canada, LIMRA
0
Source: Statistics Canada
2006
2031
100+
90-99
80-89
70-79
60-69
50-59
40-49
30-39
20-29
10-19
0-9
Millions
2007 Annual Meeting
Assemblée annuelle 2007
Demographics
Population of Canada by Age Group
6
5
4
3
2
1
2007 Annual Meeting
Assemblée annuelle 2007
Questions?
2007 Annual Meeting
Assemblée annuelle 2007
Long Term Care Insurance
Anke Roman
Director, Individual Health Pricing
Sun Life Financial
June 28, 2007
2007 Annual Meeting
Assemblée annuelle 2007
Agenda
• The Need for LTCI
• Barriers to Sales
• The Value of Insurance
2007 Annual Meeting
Assemblée annuelle 2007
Who will need care?
At age 65, the lifetime
probability of
developing either a
need for help with two
or more activities of
daily living for at least
90 days or a cognitive
impairment is 44% for
males and 72% for
females
Cohen, Marc A., Maurice Weinrobe, Jessica Miller, and Anne Ingoldsby. "Becoming Disabled After Age 65:
The Expected Lifetime Costs of Independent Living," AARP (American Association for Retired Persons)
Public Policy Institute, 2005.
Proportion of individuals age 65+
Over the last 20 years,
the proportion of
individuals age 65 and
over increased by
23%.
2007 Annual Meeting
Assemblée annuelle 2007
25%
20%
15%
Over the next 20
years, it will reach
twice the 1986 level.
10%
5%
0%
1986
1996
2006
2016
2026
2036
Over the next 30
years, it is expected to
increase by almost
90%.
Who receives care?
2007 Annual Meeting
Assemblée annuelle 2007
•
•
•
7.4% of Canadians age 65 and over
live in institutions
31.6% of Canadians age 85 and over
live in institutions
For those who live in private dwellings
(not institutions):
•
•
8.7% of men and 12.7% of women age 65
and over receive personal care
30.5% of men and 38.5% of women age 85
and over receive personal care
A Portrait of Seniors in Canada: 2006. Statistics Canada
Cost of care
2007 Annual Meeting
Assemblée annuelle 2007
•
Facility care:
–
–
–
–
•
Retirement homes:
–
–
•
24 hour supervision by an RN
$712-$5,500 a month by type of room and province
Waiting lists can be long (one or two years)
Is this where you want to live?
Accommodation can cost over $5,000 a month
Personal care services may be in addition
Home care:
–
–
Depends on level of care required
Example:
•
•
•
2 hours nursing care 3 days / week at $40 / hour
2 hours personal care 7 days / week at $20 / hour
3 hours homemaking 4 days / week at $20 / hour
Total = $3,293 / month
A Portrait of Seniors in Canada: 2006. Statistics Canada
2007 Annual Meeting
Assemblée annuelle 2007
Government home care spending
• Government home care
spending reached $3.4 billion in
2003/04, an average annual
increase of over 9% from
1994/95
• Even so, 65% of adults who
needed help with eating,
bathing or dressing did not
receive government-subsidized
home care
Public-Sector Expenditures and Utilization of Home Care Services in Canada:
Exploring the Data, Canadian Institute for Health Information, March 2007.
Kathryn Wilkins. "Government-subsidized home care" in Health Reports, Vol. 17, No.
4, October 2006, Statistics Canada. Based on 2003 statistics.
Alberta’s aging population
2007 Annual Meeting
Assemblée annuelle 2007
•
•
•
In 2003, seniors spent an average of 60%
more per person on health care than nonseniors
In 2001, 44% of Alberta seniors reported
their everyday activities were limited
because of a health-related condition or
problem
According to Alberta Health and Wellness,
about 10% of Alberta seniors received home
care in 2002/03 and made up 41% of all
home care clients
Source: Alberta Seniors and Community Supports,
Fact Sheet: A Portrait of Alberta Seniors, 2006
2007 Annual Meeting
Assemblée annuelle 2007
Home care costs (Alberta)
• If you have Alberta Health Care Insurance,
home care services, up to an assessed
amount, are covered to a monthly maximum
of $2,950
• Housekeeping and companion care service
charges apply and are based on income
(maximum charge is $300 a month)
2007 Annual Meeting
Assemblée annuelle 2007
Long-term care facilities
(Alberta)
•
•
•
•
$1,205 a month for standard room (four beds)
$1,277 a month for semi-private room (two beds)
$1,469 a month for private room
Plus supplementary service costs like
•
•
•
•
•
•
•
private duty nursing / companion care
co-payment for special equipment as covered through the
Alberta Aids to Daily Living program
glasses/ hearing aids
professional health care services not covered by the
Alberta Health Care Insurance Plan or an insurer
laundry
hairdresser services
telephone
• Types of rooms available differ by home
2007 Annual Meeting
Assemblée annuelle 2007
Barriers to sales
•
•
•
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•
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Misconception regarding government coverage
Product new and not well known
Advisor understanding/buy-in
High cost of coverage
Competition with other products
No premium guarantees
U/W seen as painful and complex
Bad press
2007 Annual Meeting
Assemblée annuelle 2007
Value of Insurance
(dependent at age 65)
Age
Monthly
premium*
- low -
Monthly
premium*
- high -
Acc Value of avg
premium paid @
age 65 (3% int a.t.)
# of months of care
to break even
($3,000/month)
40
50
80
28,898
10
50
105
125
26,082
9
60
170
220
12,624
4
* Avg of male/female for typical comprehensive indemnity plan
($100/day, 30 day EP, unlimited BP, no riders)
2007 Annual Meeting
Assemblée annuelle 2007
Value of Insurance
(dependent at age 80)
Monthly
premium*
- high -
Acc Value of
avg premium
paid @ age 80
(3% int a.t.)
# of months of
care to break
even
($3,000/month)
Placement
Ratio
Age
Monthly
premium*
- low -
40
50
80
59,764
20
75-85%
50
105
125
66,716
22
65-75%
60
170
220
63,894
21
55-65%
70
420
530
66,401
22
15-25%
* Avg of male/female for typical comprehensive indemnity plan
($100/day, 30 day EP, unlimited BP, no riders)
2007 Annual Meeting
Assemblée annuelle 2007
The Cost of waiting to buy
LTCI
•
•
•
Monthly premium increases
No benefits for early claims
Chance of being insurable decreases
2007 Annual Meeting
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What are the chances that . . .
• We will live long lives with no need for medical
intervention or long term care?
• Our health care system will be able to cover all
costs?
• The price of insurance will be cheaper than it is
today?
• Insurers will liberalize their definitions of
dependency?
• People will become more insurable as they age?
2007 Annual Meeting
Assemblée annuelle 2007
Questions?
2007 Annual Meeting
Assemblée annuelle 2007
Long Term Care Insurance
Frédéric Jacques
Director, Living Benefits
Munich Re
June 28, 2007
2007 Annual Meeting
Assemblée annuelle 2007
Agenda
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Product Design
Pricing Assumptions
LTC Around the World
2007 Annual Meeting
Assemblée annuelle 2007
LTC Product Design
•
Types of Benefits:
•
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Indemnity (fixed)
Indemnity for formal care (listed and defined)
True Reimbursement
•
•
Payer status must be defined (government, workers
compensation)
Type of plans
•
•
•
•
Home Care (HC) Only plans
Nursing Home (NH) Only plans
Comprehensive (HC + NH)
“Structured Benefits” – daily benefit varies by
type of care
2007 Annual Meeting
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LTC Product Design
Benefits triggered on failure of:
•
•
2/6 ADLs (Activities of Daily Living)
- Bathing
- Dressing
- Toileting
- Transferring
- Continence
- Eating
Cognitive Impairment (except nonorganic)
2007 Annual Meeting
Assemblée annuelle 2007
LTC Product Design
Benefits qualifier:
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•
Daily, weekly or monthly
Benefits amount
•
•
Maximum Benefits:
•
•
•
•
$10 to $330 per day (or weekly/monthly equivalent)
Expressed in years
Expressed in terms of care days
Expressed in terms of cash amount
Shared Care Benefits
•
•
•
Additional Pool
Two Share one
Inherit on Death
2007 Annual Meeting
Assemblée annuelle 2007
LTC Product Design
•
Elimination Periods:
•
Range of choice to client
•
•
•
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0 (facility) to 180 days
Calendar days or care days?
Should EP be only paid once?
Recurring condition (e.g., 180 days)
2007 Annual Meeting
Assemblée annuelle 2007
LTC Product Design
Riders and Options
•
Emergency Response System,
Durable Medical Equipment,
House Alteration
•
Restoration of benefits
•
COLA
Substitute Services Clause,
Alternate plan of care,
Caregiver training benefit
•
GIO
•
Return of Premium on death
•
Waiver of premiums
•
Spousal discount
•
•
•
•
Bed Reservation
Managed Care/Care
Coordinator
Respite care
2007 Annual Meeting
Assemblée annuelle 2007
LTC Product Design
•
Exclusions for Benefits:
•
•
•
•
•
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Regular exclusions, e.g., self-inflicted injury
Non-organic cognitive impairment
Care for non-recognized institutions or
caregivers (e.g., family member)
Care outside Canada/US
Non-approved types of care, care-givers or
facilities
Care not certified by physician
2007 Annual Meeting
Assemblée annuelle 2007
LTC Product Design
•
Features that can present pricing issues:
•
•
•
Benefit and Elimination Periods
Inflating Benefits
Risky Options
•
•
•
•
•
Limited Pay
Survivorship Benefits
Shared Benefits
Myriad of Options
More choices = greater potential for antiselection
2007 Annual Meeting
Assemblée annuelle 2007
LTC Pricing Assumptions
•
Assumptions Needed
•
•
•
•
•
•
•
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Incidence Rates
Termination Rates
Benefit usage
Lapse
Mortality (ALR, DLR)
Expenses
Interest
Reserve and Required Capital
Distribution
Not a one size fits all. These assumptions and the risk
exposure may be different depending on your product
design.
2007 Annual Meeting
Assemblée annuelle 2007
LTC Pricing Assumptions
•
Key items impacting pricing /
profitability:
•
•
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Lapse Rates
Interest/Investment Rates
Morbidity
Expenses
2007 Annual Meeting
Assemblée annuelle 2007
International Situation of Private LTCI
•
•
•
•
Canadian market has had the benefit of
learning from other countries’ “growing
pains” and has avoided some major
pitfalls.
Canadian market has to learn from other
countries’ “success”.
Variation in product design that fits the
country markets.
Canada usually looks south of the border
for LTC
2007 Annual Meeting
Assemblée annuelle 2007
International Situation of Private LTCI
1985 Germany
1985 France
1995 Argentina
1999 (Columbia)
2005 Brasilia
1974 USA
2006 Chile
1992 Canada
1998 Mexico
1992 Australia,
New Zealand
1991 South Africa
1988 Spain
1990 Switzerland
1991 Denmark,
Great Britain,
Luxembourg,
Netherlands
1996 Italy
1998 Czech Republic,
Malta, Portugal
2001 (Russia)
2006 Ukraine
1985 Japan
1989 Israel
1992 Korea,
Singapore
1995 Taiwan
1999 (Malaysia)
2000 (Bangladesh)
2001 (China)
2007 Annual Meeting
Assemblée annuelle 2007
International Situation of Private LTCI
•
US:
•
•
•
•
•
•
•
France
•
•
Reimbursement
Tax qualified
Cola inflation/GPO
Lapse rate
Cognitive testing
Nursing home usage and ALF
x out of 6 ADL with varying payment level based on
severity of ADL
Germany
•
•
Compulsory LTC insurance
Supplementary LTC insurance
2007 Annual Meeting
Assemblée annuelle 2007
Questions?
2007 Annual Meeting
Assemblée annuelle 2007
IP-5
LTC Insurance
The Beginnings of a Market in Canada