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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. - PowerPoint PPT Presentation
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2007 Annual Meeting ● Assemblée annuelle 2007Vancouver
Canadian Institute
of Actuaries
L’Institut canadien desactuaires
IP-5IP-5
LTC InsuranceLTC InsuranceThe Beginnings of a Market in CanadaThe Beginnings of a Market in Canada
2007
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Long Term Care InsuranceLong Term Care Insurance
Saul GercowskyAVP & Pricing Actuary, Living BenefitsManulife Financial
June 28, 2007
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Agenda
• Past Sales• Future Potential
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Source: Statistics Canada, LIMRA
LTCI In-Force in Canada
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
1999 2000 2001 2002 2003 2004 2005 2006
Lives Premiums ($000s)
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Source: LIMRA
In-Force
LTCI Sales in Canada
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1999 2000 2001 2002 2003 2004 2005 2006
Lives Premiums ($000s)
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Source: LIMRA
Sales
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 family20
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Source: Statistics Canada, LIMRA
0-9
10-1
9
20-2
9
30-3
9
40-4
9
50-5
9
60-6
9
70-7
9
80-8
9
90-9
9
100+
0
1
2
3
4
5
6M
illio
ns
Population of Canada by Age Group
2006 2031
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Source: Statistics Canada
Demographics
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Questions?
Long Term Care InsuranceLong Term Care Insurance
Anke RomanDirector, Individual Health PricingSun Life Financial
June 28, 2007
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Agenda
• The Need for LTCI• Barriers to Sales• The Value of Insurance
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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.
Who will need care?
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0%
5%
10%
15%
20%
25%
1986 1996 2006 2016 2026 2036
Over the last 20 years, the proportion of individuals age 65 and over increased by 23%.
Over the next 20 years, it will reach twice the 1986 level.
Over the next 30 years, it is expected to increase by almost 90%.
Proportion of individuals age 65+
Who receives care?• 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
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A Portrait of Seniors in Canada: 2006. Statistics Canada
Cost of care• Facility care:
– 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?
• Retirement homes:– 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
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A Portrait of Seniors in Canada: 2006. Statistics Canada
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• 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.
Government home care spending
Alberta’s aging population• In 2003, seniors spent an average of 60%
more per person on health care than non-seniors
• 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
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Source: Alberta Seniors and Community Supports, Fact Sheet: A Portrait of Alberta Seniors, 2006
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)
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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
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Barriers to sales• 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
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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
Value of Insurance(dependent at age 65)
* Avg of male/female for typical comprehensive indemnity plan ($100/day, 30 day EP, unlimited BP, no riders)
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Age
Monthly premium*
- low -
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
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%
Value of Insurance(dependent at age 80)
* Avg of male/female for typical comprehensive indemnity plan ($100/day, 30 day EP, unlimited BP, no riders)
The Cost of waiting to buy LTCI
• Monthly premium increases• No benefits for early claims• Chance of being insurable decreases
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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?
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2007
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Questions?
Long Term Care InsuranceLong Term Care Insurance
Frédéric JacquesDirector, Living BenefitsMunich Re
June 28, 2007
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Agenda
• Product Design• Pricing Assumptions• LTC Around the World
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LTC Product Design
• Types of Benefits:• 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
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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 non-organic)
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LTC Product Design
Benefits qualifier:• Daily, weekly or monthly• Benefits amount
• $10 to $330 per day (or weekly/monthly equivalent)• Maximum Benefits:
• 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
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LTC Product Design
• Elimination Periods:• Range of choice to client
• 0 (facility) to 180 days• Calendar days or care days?• Should EP be only paid once?• Recurring condition (e.g., 180 days)
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LTC Product Design
Riders and Options• Emergency Response System,
Durable Medical Equipment, House Alteration
• Substitute Services Clause, Alternate plan of care, Caregiver training benefit
• Bed Reservation
• Managed Care/Care Coordinator
• Respite care
• Restoration of benefits
• COLA
• GIO
• Return of Premium on death
• Waiver of premiums
• Spousal discount2007
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LTC Product Design
• Exclusions for Benefits:• 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
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• 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 anti-
selection
LTC Product Design20
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LTC Pricing Assumptions
• Assumptions Needed• Incidence Rates• Termination Rates• Benefit usage• Lapse• Mortality (ALR, DLR)• Expenses• Interest• Reserve and Required Capital• DistributionNot a one size fits all. These assumptions and the risk
exposure may be different depending on your product design.
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• Key items impacting pricing / profitability: • Lapse Rates• Interest/Investment Rates• Morbidity• Expenses
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7LTC Pricing Assumptions
• 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
International Situation of Private LTCI20
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1985 Japan1989 Israel1992 Korea,
Singapore1995 Taiwan1999 (Malaysia)2000 (Bangladesh)2001 (China)
1992 Australia, New Zealand
1991 South - Africa
1974 USA1992 Canada1998 Mexico
1995 Argentina1999 (Columbia)2005 Brasilia2006 Chile
1985 Germany1985 France1988 Spain1990 Switzerland1991 Denmark,
Great Britain, Luxembourg, Netherlands
1996 Italy1998 Czech Republic, Malta, Portugal 2001 (Russia)2006 Ukraine
International Situation of Private LTCI20
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• US:• Reimbursement• Tax qualified• Cola inflation/GPO• Lapse rate• Cognitive testing• Nursing home usage and ALF
• France• x out of 6 ADL with varying payment level based on
severity of ADL• Germany
• Compulsory LTC insurance• Supplementary LTC insurance
International Situation of Private LTCI20
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Questions?
IP-5IP-5
LTC InsuranceLTC InsuranceThe Beginnings of a Market in CanadaThe Beginnings of a Market in Canada
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