LTC Insurance The Beginnings of a Market in Canada

Transcription

1 Canadian Institute of Actuaries L Institut canadien des actuaires Vancouver

2 IP-5 LTC Insurance The Beginnings of a Market in Canada

3 Long Term Care Insurance Saul Gercowsky AVP & Pricing Actuary, Living Benefits Manulife Financial June 28, 2007

4 Agenda Past Sales Future Potential Source: Statistics Canada, LIMRA

5 In-Force LTCI In-Force in Canada 70,000 60,000 50,000 40,000 30,000 20,000 10, Lives Premiums ($000s) Source: LIMRA

6 Sales LTCI Sales in Canada 14,000 12,000 10,000 8,000 6,000 4,000 2, Lives Premiums ($000s) Source: LIMRA

7 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

8 Demographics Population of Canada by Age Group Millions Source: Statistics Canada

9 Questions?

10 Long Term Care Insurance Anke Roman Director, Individual Health Pricing Sun Life Financial June 28, 2007

11 Agenda The Need for LTCI Barriers to Sales The Value of Insurance

12 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.

13 Proportion of individuals age % 20% 15% 10% 5% 0% 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%.

14 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 A Portrait of Seniors in Canada: Statistics Canada

15 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 A Portrait of Seniors in Canada: Statistics Canada

16 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 Kathryn Wilkins. "Government-subsidized home care" in Health Reports, Vol. 17, No. 4, October 2006, Statistics Canada. Based on 2003 statistics.

17 Alberta s aging population 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

18 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)

19 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

20 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

21 Value of Insurance (dependent at age 65) Age Monthly premium* -low Monthly premium* - high Acc Value of avg premium age 65 (3% int a.t.) 28,898 26,082 12,624 * Avg of male/female for typical comprehensive indemnity plan ($100/day, 30 day EP, unlimited BP, no riders) # of months of care to break even ($3,000/month)

22 Value of Insurance (dependent at age 80) Age Monthly premium* -low Monthly premium* -high Acc Value of avg premium age 80 (3% int a.t.) 59,764 66,716 63,894 66,401 # of months of care to break even ($3,000/month) Placement Ratio 75-85% 65-75% 55-65% 15-25% * Avg of male/female for typical comprehensive indemnity plan ($100/day, 30 day EP, unlimited BP, no riders)

23 The Cost of waiting to buy LTCI Monthly premium increases No benefits for early claims Chance of being insurable decreases

24 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?

25 Questions?

26 Long Term Care Insurance Frédéric Jacques Director, Living Benefits Munich Re June 28, 2007

27 Agenda Product Design Pricing Assumptions LTC Around the World

28 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

29 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)

30 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

31 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)

32 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 discount

33 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

34 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

35 LTC Pricing Assumptions Assumptions Needed 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.

36 LTC Pricing Assumptions Key items impacting pricing / profitability: Lapse Rates Interest/Investment Rates Morbidity Expenses

37 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

38 International Situation of Private LTCI 1995 Argentina 1999 (Columbia) 2005 Brasilia 1974 USA 2006 Chile 1992 Canada 1985 Germany 1985 France 1988 Spain 1990 Switzerland 1991 Denmark, Great Britain, Luxembourg, Netherlands 1996 Italy 1998 Czech Republic, Malta, Portugal 1991 South - Africa 1985 Japan 1989 Israel 1992 Korea, Singapore 1995 Taiwan 1999 (Malaysia) 1992 Australia, New Zealand 1998 Mexico 2001 (Russia) 2000 (Bangladesh) 2006 Ukraine 2001 (China)

39 International Situation of Private LTCI 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

40 Questions?

41 IP-5 LTC Insurance The Beginnings of a Market in Canada